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The Four R’s Revisited: Regulations, Rulings,
Reliance, and Retroactivity in the 21st Century:
A View From Within
Mitchell Rogovin (1931–1996)
Chief Counsel, Internal Revenue Service 1965–19661
Donald L. Korb
Chief Counsel, Internal Revenue Service 2004–2
I. INTRODUCTION ............................................................. 324 II. REGULATIONS PROGRAM .............................................. 326
Legal Effect of Regulations ..............................327 III. OTHER PUBLISHED GUIDANCE ..................................... 330
Revenue Rulings...............................................330 Revenue Procedures..........................................336 Announcements and Notices ............................339
IV. LETTER RULINGS PROGRAM ......................................... 342 Letter Rulings...................................................342 Closing Agreements..........................................349 Advanced Pricing Agreements .........................350 Prefiling Agreements ........................................351 Determination Letters ......................................351 Information Letters ..........................................352
V. LEGAL ADVICE PROGRAM ............................................. 353 Technical Advice Memoranda..........................354 Chief Counsel Notices.......................................356 Chief Counsel Advice........................................356 Program Manager Advice ................................358 Associate Memoranda ......................................359 Field Legal Advice............................................360 Litigation Guideline Memoranda ....................361
1. This article is a revision of Mitchell Rogovin’s monograph The Four R’s: Regula-
tions, Rulings, Reliance, and Retroactivity: A View from Within, which was originally pub-
lished by Commerce Clearing House, Inc., in Federal Tax Guide Reports, Vol. 49, No. 8
(December 3, 1965) and reprinted by the Government Printing Office as Document 6062 (4-
1970).
2. I would like to thank the following people, who were Chief Counsel attorneys in
2008, for their assistance with this project: George Bowden, Deborah Butler, Mark Cottrell,
Philip Lindenmuth, Stuart Murray, Margo Stevens, Robert Wearing, and Kathryn Zuba.
324 Duquesne Law Review Vol. 46
Other Legal Advice...........................................362 VI. ACQUIESCENCE PROGRAM............................................ 363
Acquiescence and Actions on Decision .............363 VII. OTHER COMMUNICATIONS............................................ 369
News Releases and Fact Sheets........................369 Coordinated Issue Papers ................................370 Appeals Settlement Guidelines ........................370 Audit Techniques Guides .................................370 Large and Midsized Business
Commissioner’s and Industry
Director’s Directives .........................................371 Miscellaneous Material ....................................371 Oral Communications......................................372
VIII. CONCLUSION ................................................................ 373
I. INTRODUCTION
Over forty years have passed since then-Chief Counsel Mitchell
Rogovin published his original The Four R’s monograph, and sev-
eral generations of tax practitioners have looked to it as a guide in
interpreting the value of the communications issued by the Inter-
nal Revenue Service. As the cliché goes, much has changed in
those years, but much has remained the same.
Those who are familiar with the prior version of this monograph
will find that this revision shares the same structure, focusing on
describing the kinds of guidance the Internal Revenue Service is-
sues to the public and explaining the reliance the public can place
on each type of guidance. Now, as then, tax litigation is not a very
satisfactory means for either taxpayers or the Government to re-
solve issues about the meaning and application of the Internal
Revenue Code, and, thus, it continues to be vital that the Service
use guidance to inform taxpayers of the positions it takes and that
it is clear whether taxpayers can rely on those positions in plan-
ning their transactions.
Just as in 1965, the Service continues to use the publication of
regulations and revenue rulings as its principal means of giving
taxpayers guidance in interpreting the Internal Revenue Code.
Today, however, the Service oftentimes issues substantive guid-
ance in the form of Internal Revenue Bulletin Announcements and
Notices, which are published with the intent that taxpayers can
rely upon them as statements of Service position. With the advent
of the internet and the growth of the tax press, more information
Spring 2008 The Four R’s Revisited 325
than ever is available to tax practitioners concerning how the Of-
fice of Chief Counsel analyzes the provisions of the Code. How-
ever, the sheer volume of guidance available to tax practitioners
can only be properly understood if the reader has a comprehensive
understanding of how that the guidance was developed and
whether it can be relied upon.
This is particularly true of the new kinds of work products that
have made their way into the public domain over the past fifteen
years or so: Chief Counsel Notices, Chief Counsel Advice, Associ-
ate Chief Counsel Memoranda, and the soon-to-be-released infor-
mal email advice. These work products are not drafted with the
intent that taxpayers may rely upon their analyses or conclusions
as statements of Service positions. Some of these work products,
however, do represent the collective and considered view of the
Associate Chief Counsel Office in the Office of Chief Counsel that
is responsible for interpreting the particular provisions of the
Code. While taxpayers and their advisers may find these work
products informative about the thinking of that particular Associ-
ate Chief Counsel Office and the likely response of the Service to a
particular situation, thoughtful tax practitioners and well-advised
taxpayers understand that they cannot be assured that the Ser-
vice will continue to maintain that position. Some of the other
work products may represent only the views of a particular Office
of Chief Counsel attorney and/or that attorney’s reviewer, while
still others may represent a reaction to a time-sensitive problem
that was based on limited information and facts, which may not
even be apparent from the publicly available work product. Need-
less to say, these kinds of work products have a very limited value
in predicting the Service’s future responses to similar situations,
and taxpayers and their advisers should be extremely careful
about drawing any conclusions from them.
What all of this means is that Mr. Rogovin’s caution at the end
of the introduction to his original The Four R’s monograph re-
mains true today:
In utilizing the information offered by the Service to the tax-
payer, it is important for the taxpayer to keep in mind that
the medium through which the information is communicated
to him has been carefully chosen by the Service and repre-
sents a balance between the taxpayer’s needs for information
and the Service’s needs for reasonable latitude in administer-
ing the tax law.
326 Duquesne Law Review Vol. 46
Wise taxpayers and their advisors should keep this caution in
mind as they work with the various forms of guidance available to
them.
II. REGULATIONS PROGRAM
The regulations3 constitute the primary source for guidance as
to the Service’s position regarding the interpretation of the Inter-
nal Revenue Code.4
Regulations may be broadly categorized into two types. First is
the “legislative regulation.” Under the Code, Congress delegates
to the Secretary of the Treasury specific authority in certain Code
sections to promulgate detailed rules. The best example of this is,
as it was in 1965, the power given to the Secretary under the con-
solidated return sections.5
The second and broader category is what may be termed “inter-
pretative regulations.”6 They contain the Service’s interpretation
3. The Treasury Department has been issuing income tax regulations since 1914. See
U.S. Treas. Reg. 33 (1914); these original regulations consisted of a total of 170 pages. The
authority to issue regulations is given to the Secretary of the Treasury or his delegate in
some cases under specific sections of the Code and in general under I.R.C. § 7805(a) (2000).
Unless otherwise stated, references to the Code refer to the Internal Revenue Code of 1986,
as amended.
4. The ultimate authority to promulgate regulations is vested in the Secretary of the
Treasury. Treas. Reg. § 601.601(a) (1987). To assist him in this function, the Offices of the
Associate Chief Counsel in the Office of Chief Counsel are responsible for drafting regula-
tions. See id.; see also I.R.S., Chief Counsel Directives Manual 32.1.1.1(4) (Aug. 11, 2004)
[hereinafter C.C.D.M.], available at http://www.irs.gov/irm/index.html (follow Part 32 hy-
perlink). Further assistance is provided by the Office of the Assistant Secretary for Tax
Policy in the Treasury Department, which reviews all regulations to ensure that they are
consistent with the Government’s overall tax policy. The Assistant Secretary of the Treas-
ury (Tax Policy) is the final signatory in the regulations approval process. See Treasury
Order 111-01 (Mar. 16, 1981), available at http://www.ustreas.gov/regs/to111-01.htm;
C.C.D.M., supra, 32.1.1.3.12(1), 32.1.6.8.4(1) (Aug. 11, 2004); MICHAEL I. SALTZMAN, IRS
PRACTICE AND PROCEDURE ¶ 3.02[2] (2007).
5. I.R.C. § 1502 (Supp. V 2005). One organization estimates that there are more than
550 individual provisions of the Code that specifically grant authority to promulgate regu-
lations to effectuate the purposes of a particular section, to apply the provisions of a par-
ticular section to a particular transaction, or to implement concepts that are expressed in
general terms. See New York State Bar Ass’n Tax Section, Report on Legislative Grants of
Regulatory Authority 2-6 (Nov. 3, 2006),
http://www.nysba.org/Content/ContentGroups?Section_Information1/Tax_Section_Reports/
1121rpt.pdf.
6. There is a third general class of regulations usually referred to as “procedural regu-
lations.” See, e.g., I.R.C. § 706(d) (2000) (“if during any taxable year of the partnership
there is a change in any partner’s interest in the partnership, each partner’s distributive
share of any item of income, gain, loss, deduction, or credit of the partnership for such
taxable year shall be determined by the use of any method prescribed by the Secretary by
regulations . . . .”). Procedural regulations are generally considered to be of binding effect.
See, e.g., Boulez v. Comm’r, 810 F.2d 209, 213-14 (D.C. Cir. 1987) (procedural offer and
Spring 2008 The Four R’s Revisited 327
of the various sections of the Code and serve to guide the person-
nel of the Service as well as the taxpaying public in the applica-
tion of the law.7
Legal Effect of Regulations
Historically, distinctions were drawn between the legal effect of
legislative regulations and interpretive regulations. It has been
broadly stated that legislative regulations were given the force
and effect of law8 while interpretive regulations were not.9 The
Supreme Court, however, has addressed the binding legal effect of
regulations without regard to whether they were legislative or
interpretive. In United States v. Mead Corp.,10 the Supreme Court
observed that Congress
may not have expressly delegated authority or responsibility
to implement a particular [statutory] provision or fill a par-
compromise regulations at Treas. Reg. § 301.7122-1(d) (1986) requiring written offer and
acceptance entitled to a “strong presumption of validity”).
Procedural regulations relating to particular sections of the Code must be distin-
guished from the Statement of Procedural Rules, 26 C.F.R. Part 601, that are procedural
rules promulgated by the Commissioner of Internal Revenue pursuant to the authority
granted under 5 U.S.C. § 301 (2000) (“The head of an Executive department or military
department may prescribe regulations for the government of his department, the conduct of
its employees, the distribution and performance of its business, and the custody, use and
preservation of its records, papers, and property.”). The purpose of these rules is to outline
both for public consumption and internal guidance those rules which control the operation
of the Internal Revenue Service in carrying out its prime function of administering and
enforcing the internal revenue laws. See Luhring v. Glotzbach, 304 F.2d 560, 564 n.2 (4th
Cir. 1962). See also Flynn v. Comm’r, 269 F.3d 1064, 1072 (D.C. Cir. 2001) (Part 601 rules
“serve merely as guidelines for conducting the internal affairs of the agency”); Estate of
Jones v. Comm’r, 795 F.2d 566, 571 (6th Cir. 1986) (“the circuits have consistently held that
the Internal Revenue’s Statement of Procedural Rules is only directory and not manda-
tory”); Ward v. Comm’r, 784 F.2d 1424, 1431 (9th Cir. 1986) (procedural rules directory, not
mandatory); United States v. Horne, 714 F.2d 206, 207 (1st Cir. 1983) (procedural rules set
forth in 26 C.F.R. § 610.101 “were not designed to protect the constitutional rights of tax-
payers”); Einhorn v. DeWitt, 618 F.2d 347, 350 (5th Cir. 1980) (procedural rules’ purpose
“to govern the internal affairs of the Internal Revenue Service”); Rosenberg v. Comm’r, 450
F.2d 529, 532-33 (10th Cir. 1971) (procedural rules directory, not mandatory).
7. The notice and comment provisions of the Administrative Procedure Act do not
apply to interpretive regulations. 5 U.S.C. § 553(b)(A) (2000). Nevertheless, the Treasury
Department issues interpretive regulations under procedures similar to those applicable to
legislative regulations following the APA’s procedures for notice and comment rulemaking.
See, e.g., Banker’s Life & Cas. Co. v. United States, 142 F.3d 973, 978 (7th Cir. 1998);
SALTZMAN, supra note 4, ¶ 3.02(2).
8. See Chrysler Corp. v. Brown, 441 U.S. 281, 295 (1979) (valid administrative rules
legislative in nature have the force and effect of law).
9. See, e.g., Bureau of Alcohol, Tobacco, and Firearms v. Fed. Labor Relations Auth.,
464 U.S. 89, 97-98 (1983).
10. 533 U.S. 218 (2001).
328 Duquesne Law Review Vol. 46
ticular gap. Yet it can still be apparent from the agency’s
generally conferred authority and other statutory circum-
stances that Congress would expect the agency to be able to
speak with the force of law when it addresses ambiguity in
the statute or fills a space in the enacted law, even one about
which “Congress did not actually have an intent” as to a par-
ticular result.11
More recently, the Supreme Court reiterated that an agency’s
authority to administer a congressionally created program “neces-
sarily requires the formulation of policy and the making of rules to
fill any gap left, implicitly or explicitly, by Congress,” and when an
agency fills such a gap reasonably, and in accordance with other
applicable requirements, the courts accept the result as legally
binding.12
In any event, the Supreme Court has consistently ruled with re-
gard to both interpretive and legislative Treasury Regulations
that courts must defer to and uphold the agency’s regulatory in-
terpretation so long as it is reasonable.13
Reliance
Treasury regulations that are final or temporary may be relied
on by taxpayers in planning transactions in the same manner in
which they may rely upon a provision of the Code. In fact, one
11. Mead, 533 U.S. at 229 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837, 845 (1984)).
12. Long Island Care at Home, Ltd., v. Coke, 127 S. Ct. 2339, 2345-46 (2007) (quoting
Chevron, 467 U.S. at 843, and citing Mead, 533 U.S. at 227). Applicable requirements, such
as procedural requirements, include Federal Register publication of certain proposed rules.
Other applicable requirements are providing the opportunity to submit oral or written
comments on proposed rules and generally not publishing substantive rules less than 30
days before their effective dates. See generally 5 U.S.C. § 553 (2000).
13. Boeing Co. v. United States, 537 U.S. 437, 447-450 (2003) (“Even if we regard the
challenged regulation as interpretive because it was promulgated under § 7805(a)’s general
rulemaking grant rather than pursuant to a specific grant of authority, we must still treat
the regulation with deference.”); United States v. Cleveland Indians Baseball Co., 532 U.S.
200, 219 (2001) (“[W]e defer to the Commissioner’s regulations as long as they implement
the congressional mandate in some reasonable manner. We do this because Congress has
delegated to the [Commissioner], not to the courts, the task of prescribing all needful rules
and regulations for the enforcement of the Internal Revenue Code. This delegation helps
guarantee that the rules will be written by masters of the subject . . . who will be responsi-
ble for putting the rules into effect.”) (internal citations and quotation marks omitted; al-
teration in original)); Cottage Sav. Ass’n v. Comm’r, 499 U.S. 554, 560-61 (1991) (“Because
Congress has delegated to the Commissioner the power to promulgate “all needful rules
and regulations for the enforcement of [the Internal Revenue Code],” 26 U.S.C. § 7805(a),
we must defer to his regulatory interpretations of the Code so long as they are reason-
able.”).
Spring 2008 The Four R’s Revisited 329
important purpose for issuing regulations is to give the public
knowledge of the Service’s position with respect to particular Code
sections.14 However, taxpayers generally may not rely on pro-
posed regulations for planning purposes, except if there are no
applicable final or temporary regulations in force and there is an
express statement in the proposed regulations that taxpayers may
rely on them currently. If there are applicable final or temporary
regulations in force, taxpayers may only rely on proposed regula-
tions for planning purposes in the limited circumstances that the
proposed regulations contain an express statement permitting
taxpayers to rely on them currently, notwithstanding the exis-
tence of the final or temporary regulations.15
Retroactivity
Before 1996, all Treasury Regulations were assumed to have
retroactive effect unless the Secretary specifically noted other-
wise.16 Amended by the Taxpayer Bill of Rights 2,17 the Code now
generally prohibits retroactive application of any temporary, pro-
posed, or final regulation.18 Exceptions to the general rule against
retroactive application include regulations issued: (1) within 18
months of enactment of the related statutory provision;19 (2) to
14. See H.R. REP. NO. 70-1882, at 22 (1928) (Conf. Rep.), reprinted in 1928
U.S.C.C.A.N. (“[I]t is believed that sound administration properly places upon the Govern-
ment the responsibility and burden of interpreting the law and of prescribing regulations
upon which taxpayers may rely . . . .”); Mutual Sav. Life Ins. Co. v. United States, 488 F.2d
1142, 1145-46 (5th Cir. 1974) (“A taxpayer has the right to rely upon the Government’s
Regulations and their published illustrations. Treasury Regulations having the force and
effect of law are binding on tax officials, as well as taxpayers.” (citing Pacific Nat’l Bank of
Seattle v. Comm’r, 91 F.2d 103 (9th Cir. 1937))).
15. See C.C.D.M., supra note 4, 32.1.1.2.2(2) (Aug. 11, 2004).
16. See I.R.C. § 7805(b) (1986), which read as follows: “(b) Retroactivity of regulations
or rulings. The Secretary may prescribe the extent, if any, to which any ruling or regula-
tion, relating to the internal revenue laws, shall be applied without retroactive effect.”
17. Pub. L. No. 104-168, § 1101(a), 110 Stat. 1452, 1468-69 (1996).
18. Section 7805 of the Internal Revenue Code states:
Except as otherwise provided in this subsection, no temporary, proposed, or fi-
nal regulation relating to the internal revenue laws shall apply to any taxable
period ending before the earliest of the following dates:
(A) The date on which such regulation is filed with the Federal Register.
(B) In the case of any final regulation, the date on which any proposed or
temporary regulation to which such final regulations relates was filed
with the Federal Register.
(C) The date on which any notice substantially describing the expected
contents of any temporary, proposed, or final regulation is issued to the
public.
I.R.C. § 7805(b)(1) (2000).
19. Id. § 7805(b)(2).
330 Duquesne Law Review Vol. 46
prevent abuse;20 (3) to correct procedural defects in the issuance of
a prior regulation;21 (4) relating solely to internal Treasury De-
partment policies, practices, or procedures;22 and (5) pursuant to
an explicit legislative grant from Congress authorizing a retroac-
tive effective date.23 The Secretary also may permit any taxpayer
to elect to apply any regulation before the statutory effective
date.24
Conclusions
The regulations are the most authoritative source for determin-
ing the meaning of the Code. They are binding upon the Service,
and current administrative practice is to make all amendments or
modifications of a regulation prospective except when such modifi-
cation or revocation benefits the taxpayer, merely clarifies an ex-
isting regulation, or is to prevent abuse.25
III. OTHER PUBLISHED GUIDANCE
Revenue Rulings
Definition
Revenue rulings are official interpretations by the Service,
which are prepared in the Associate Chief Counsel Offices and
published in the Internal Revenue Bulletin by the Service. Reve-
nue rulings are compiled annually in the Cumulative Bulletin26
and represent the conclusions of the Service on the application of
the law to the pivotal facts stated in the revenue ruling.27 They
are intended to inform both the taxpayers and the personnel of the
Service as to the Commissioner’s position with respect to a par-
20. Id. § 7805(b)(3).
21. Id. § 7805(b)(4).
22. Id. § 7805(b)(5).
23. I.R.C. § 7805(b)(6) (2000).
24. Id. § 7805(b)(7).
25. See I.R.S. Chief Couns. Notice CC-2003-014 (May 8, 2003) (Chief Counsel litigating
positions should be derived from, and consistent with, the Code and published guidance).
26. Treas. Reg. § 601.601(d)(2) (1987).
27. Id. § 601.601(d)(2)(i). “The conclusions expressed in Revenue Rulings will be di-
rectly responsive to and limited in scope by the pivotal facts stated in the Revenue Ruling.
Also, the stated facts will be so technically oriented that field employees and taxpayers may
clearly understand what was, and what was not, decided.” Policy Statement 11-69, Inter-
nal Revenue Manual 1.2.16.1.11 (May 18, 1967) [hereinafter I.R.M.], available at
http://www.irs.gov/irm/index.html. See also Introduction, 2008-1 I.R.B. (reprinted in all
issues of the Internal Revenue Bulletin).
Spring 2008 The Four R’s Revisited 331
ticular issue thus ensuring that this issue will be handled uni-
formly throughout the country.28
The published revenue ruling program tends to provide many of
the same benefits as the letter ruling program.29 The emphasis of
the revenue ruling program is centered upon uniformity of inter-
pretation, rather than on the problem of the individual taxpayer.
By informing the taxpayers of the Service’s position in a published
ruling, the need for taxpayers to request a letter ruling on the
same subject is eliminated.30 This reduces the burden on the let-
ter rulings program and, as a general rule, tends to reduce or even
eliminate litigation.
At one time, the primary source for revenue rulings were letter
rulings, and the Service selected for publication all letter rulings
having substantial value as precedents. Now that letter rulings
are publicly released, there is less need to convert letter rulings to
revenue rulings. Nowadays, the Service does not usually initiate
the publication of a revenue ruling in any area until the public or
an operating division within the Service has demonstrated the
need for guidance in an area by initiating litigation or requesting
advice. The decision to prepare a revenue ruling is now part of the
Service and Treasury Department’s Priority Guidance Plan.31
28. Treas. Reg. § 601.601(d) (1987); C.C.D.M., supra note 4, 32.2.2 (Aug. 11, 2004).
29. The letter ruling program is discussed infra page 342 and following.
30. Practice does not always follow theory. See Rose, The Rulings Program of the In-
ternal Revenue Service, 35 TAXES 907, 910 (1957), in which a former Chief Counsel stated
“far too many rulings are requested today—unnecessary rulings where competent tax ad-
visers know that there can be no successful challenge on audit.” But see Taylor, Tax Rul-
ings: New Rules and Procedures, N.Y.U. 21ST INST. ON FED. TAX. 69, 91 (1963) (suggesting
that “it is always prudent if possible to obtain a private ruling where substantial sums are
involved”).
31. The Priority Guidance Plan (PGP) is a document developed jointly by the Service
and the Treasury Department’s Office of Tax Policy “on an annual basis to identify and
prioritize the tax issues [to] be addressed in . . . published . . . guidance.” I.R.S. Notice
2007-41, 2007-21 I.R.B. 1287 (2007). The process for selecting projects for inclusion on the
Priority Guidance Plan involves soliciting, evaluating, and prioritizing proposals for guid-
ance. Every year the Service invites suggestions from the public at large and the subject-
matter experts within the Government (including those in the IRS operating divisions). See
id. Also, the Office of Chief Counsel engages in an extensive dialogue regarding potential
guidance projects with stakeholder groups, including professional organizations, industry
associations, and taxpayer advocacy groups. Finally, recent legislative changes to the In-
ternal Revenue Code are considered.
A number of considerations are then taken into account in evaluating a project for inclusion
on the PGP. A project is considered high priority if recently enacted legislation mandates
specific published guidance, or if guidance is necessary to implement a new statutory provi-
sion. A new statutory provision that is susceptible to more than one interpretation may
merit a priority project to eliminate, or at least reduce, future disputes with taxpayers over
the meaning of the new statute. Priority may also be given in a current guidance plan year
to finalizing guidance issued in temporary or proposed form as part of a prior guidance plan
332 Duquesne Law Review Vol. 46
A revenue ruling is different, both in form and in substance,
from a letter ruling dealing with the same subject matter. A letter
ruling essentially consists of a detailed recital of the relevant facts
followed by a statement of conclusions. The rationale and refer-
ence to authorities should be limited to that necessary to support
the conclusion, and no attempt is made to formulate specified de-
cisions into a stated principle or rule.
Revenue rulings, on the other hand, detail all relevant facts in
generic terms, and consideration is given to all of the possible
situations which might fall within the basic framework of the rul-
ing. Necessary distinctions and limitations are drafted to insure
the proper application of the revenue ruling to other cases within
the ambit of its facts.32
In the final analysis, however, both the revenue ruling and the
letter ruling constitute an interpretation of the Code with respect
to a particular set of facts. In that sense, they differ from regula-
tions which are defined as “statements of general policy or inter-
pretation formulated and adopted by the agency for guidance of
the public.”33 To ensure that revenue rulings avoid the characteri-
zation of “junior regulations,”34 the Service has adopted the rule
that revenue rulings will generally be directly responsive to, and
limited by, the stated factual basis of the underlying letter ruling
or technical advice request, much in the manner of a judicial deci-
sion.35 By doing so, the Service has established the boundaries of
this medium of communication.
year. The number of taxpayers who would be affected by a guidance project and the
amount of taxes at stake are also important considerations in prioritizing projects; greater
priority will be given to projects that affect millions of taxpayers than those that affect less
than a hundred. See id. All reasonable suggestions for guidance are evaluated based on
these types of considerations and the availability of resources, with the highest priority
being given to projects that can be accomplished consistent with available resources listed
on the Priority Guidance Plan.
32. Another important difference between the published revenue ruling and the letter
ruling is the level of review given the matter. Few letter rulings are reviewed above the
branch level of an Associate Chief Counsel Office in the Office of Chief Counsel. Revenue
rulings are all reviewed by the Chief Counsel, the Commissioner’s office, and the Office of
Tax Policy in the Treasury Department prior to issuance. See generally C.C.D.M., supra
note 4, 32.2.7 (Aug. 11, 2004).
33. See H.R. REP. NO. 79-1980, at 19 (1946); S. DOC. NO. 79-248, at 253 (1946), re-
printed in 1946 U.S.C.C.A.N.
34. Mortimer M. Caplin, Taxpayer Rulings Policy of the Internal Revenue Service: A
Statement of Principles, N.Y.U. 20TH INST. ON FED. TAX. 1, 31-32 (1962).
35. I.R.S. Tech. Info. Rel. 288 (Jan. 13, 1961), Ann. 61-16, 1961-7 I.R.B. 29. Cf. Cong.
Rec. May 24, 1946, 5649 (“Advisory interpretative rulings in particular cases are not rules
within th[e] definition” of rulemaking under the APA.).
Spring 2008 The Four R’s Revisited 333
Some History
The revenue ruling program grew out of the Service’s reluctance
to make letter rulings publicly available to everyone. Initially,
there was controversy regarding whether the Service should be
required to publish all, or substantially all, of the rulings issued to
individual taxpayers.36 A number of arguments were put forth to
support the publication of all letter rulings:
(1) publication would enable taxpayers to insist upon being
treated uniformly;
(2) publication would reduce the duplication of effort which
takes place within the Service as a result of the continued dis-
cussion and consideration of questions which would have been
long since disposed of by published precedents;
(3) publication would permit Congress to know the manner in
which the Service applies Congressional mandates, thereby
enabling Congress to intelligently determine the desirability
or necessity of amending the Code;
(4) publication would enable Congress to more effectively hold
the Commissioner responsible for the exercise of the discre-
tionary powers which Congress has lodged in him;37 and
(5) reliance on unpublished material by Service personnel
would be stopped.38
Some of these criticisms regarding publication have been met by
the Service in other ways. For instance, since the King Subcom-
mittee hearings in 1951, the prior practice of Service personnel
relying on unpublished materials was discontinued. To this end,
the Internal Revenue Bulletin states: “Unpublished rulings will
not be relied on, used, or cited as precedents by Service personnel
36. See S. 2047, 89th Cong. (1st Sess. 1965), which would require the Internal Revenue
Service to publish within 10 days all rulings involving potential tax liabilities in excess of
$100,000. See also S. REP. NO. 69-V, Parts 1 and 2 at 229-36 (1st Sess. 1926); S. DOC. NO.
77-10, Part 9 (1st Sess. 1941), reprinted in 1941 U.S.C.C.A.N. See generally Hearings Before
the Subcommittee on Administration of the Internal Revenue Laws of the House Committee
on Ways and Means, 82d Cong. (2d Sess. 1952), 83d Cong. (1st Sess. 1953).
37. Statement of Senator Albert Gore, Sr. in support of S. 2047, 111 CONG. REC. 11399
(daily ed. May 26, 1965).
38. E.g., S. REP. NO. 59-27, at 229-36 (1st Sess. 1926).
334 Duquesne Law Review Vol. 46
in the disposition of other cases.”39 Again, as a result of the in-
quiry into the administrative practice of the Internal Revenue
Service between 1951 and 1953, a partial solution was found to
objections (2), (3), and (4). The Service proposed in Revenue Rul-
ing 240 to publish all letter rulings constituting new precedents
with four exceptions. The first three of these exceptions related to
the question of whether or not the letter ruling had any preceden-
tial value. There, it was decided that it would not be necessary to
publish rulings that were either specifically and clearly covered by
statute or regulation; that were specifically and clearly covered by
rulings or court decisions previously published in the Cumulative
Bulletin; or that involved novel or nonrecurring sets of facts. Rul-
ings in any one of these categories would not serve as significant
precedents.
The fourth non-publication category involved matters which, by
their nature, “in the interests of a wise administration of the In-
ternal Revenue Service dictated a policy of non-publication.”41
Section 6110 eventually required the release of all letter rulings
starting in 1976.42 This removed much of the incentive to convert
letter rulings constituting new precedents into revenue rulings. It
is telling that in 1976, the Service issued 568 revenue rulings.
The numbers of rulings have decreased steadily from there. By
the late eighties, the number of revenue rulings issued annually
was generally between 100 and 150, and in 1997, the program hit
an all-time low when only 57 revenue rulings were issued.43
Since that time, the number of rulings issued has increased
somewhat, although only 68 were issued in 2007. The decline of
revenue rulings is the result of a combination of factors. The re-
lease of all letter rulings obviated the concern that led to the ini-
tial creation of the revenue ruling program. Now, revenue rulings
are just one component of the Service and Treasury Department’s
annual Guidance Priority Plan. Other forms of guidance, such as
notices and announcements, cover some of the issues that were
previously addressed in revenue rulings. With the reorganization
of the Office of Chief Counsel in 1989, the same attorneys who
were writing regulations were also tasked with drafting revenue
39. Introduction, 2008-1 I.R.B. 3, available at http://www.irs.gov/pub/irs-irbs/irb08-
01.pdf.
40. 1953-1 C.B. 484.
41. Id. § 4(j).
42. I.R.C. § 6110 (1976). See infra page 342 for a complete discussion of this issue.
43. Numbers of Revenue Rulings are taken from either the final Cumulative Bulletin
or the final Internal Revenue Bulletin for each year quoted.
Spring 2008 The Four R’s Revisited 335
rulings. Thus, when regulations are need to address statutory
changes to the tax law, which by now have become almost an an-
nual event, fewer resources are devoted to the development of
revenue rulings.
Reliance and Revocation
The Commissioner has the power to revoke a revenue ruling
retroactively if it is contrary to law.44 This is consistent with the
holding in Dixon v. United States, in which the Supreme Court
treated the acquiescence in issue as if it were a revenue ruling
because, until 1953, the cumulative announcements of acquies-
cence and nonacquiescence were given revenue ruling numbers.45
Moreover, consistency and logic require that the Commissioner’s
power to change a position expressed in a ruling be certainly no
less than his power to change a position expressed in a regula-
tion.46
The information transmitted through the revenue ruling pro-
gram is intended to benefit the taxpayer by not only informing
him of the Commissioner’s position but also permitting him, in
most circumstances, to rely upon the position stated in the reve-
nue ruling in planning and consummating a transaction. Accord-
ingly, the Commissioner has limited the exercise of his power to
modify his position retroactively.47
The general policy of the Service is that taxpayers may rely
upon revenue rulings published in the Internal Revenue Bulletin
and need not have a specific letter ruling of their own.48 To en-
courage this, it is the practice of the Service to make revocation or
modification of revenue rulings prospective only.49 In addition,
revenue rulings provide recognized authority for the possible de-
fense of the negligent and substantial understatement penalties
44. Auto. Club of Mich. v. Comm’r, 353 U.S. 180 (1957); Bornstein v. United States, 345
F.2d 558 (Ct. Cl. 1965). This accords with the Congressional intent evidenced by I.R.C. §
7805(b) (2000).
45. This was prior to the institution of the Revenue Ruling series begun in 1954. See
Dixon v. United States, 381 U.S. 68, 71 n.2, 75 n.8 (1965). The Acquiescence program is
discussed infra at page 364.
46. The Supreme Court in Dixon stated that the reasons supporting the Commis-
sioner’s power to retroactively revoke his regulations “applies with even greater force to
rulings and acquiescences.” 381 U.S. at 75. Now, however, I.R.C. § 7805(b) requires that
most regulations apply only prospectively.
47. See C.C.D.M., supra note 4, 32.2.3.5.1.2.7 (Aug. 11, 2004); Treas. Reg. § 601.201(l)
(1987). This position was first announced in Rev. Rul. 54-172, 1954-1 C.B. 394.
48. Rev. Proc. 89-14, 1989-1 C.B. 814.
49. C.C.D.M., supra note 4, 32.2.3.5.1.2.7(3) (Aug. 11, 2004).
336 Duquesne Law Review Vol. 46
provisions of sections 6662 and 6664.50 However, although a tax-
payer following a revenue ruling need not prove reliance—
meaning that he may enter into the transaction without ever hav-
ing seen the revenue ruling—upon audit, it must be clear that the
taxpayer’s facts are substantially the same as those contained in
the revenue ruling.51
Even if it is clear that the taxpayer did not rely on a revenue
ruling, courts will often hold the Service to the position expressed
in the revenue ruling.52 The Office of Chief Counsel has now ex-
pressly stated that it will not take positions in litigation contrary
to a published revenue ruling, even if subsequent case law has
resulted in a state of law more favorable to the Service than ex-
isted at the time of the revenue ruling.53
Revenue Procedures
History
Prior to 1955, the Service from time to time published a variety
of documents regarding internal management practices. Occa-
sionally, when thought to be of an essential nature, the same in-
formation contained in those documents was incorporated into a
revenue ruling. To make more regular the means for disseminat-
ing procedural information, the Service created the Revenue Pro-
cedure series in 1955. In Revenue Procedure 55-1, the Service
announced its intention to publish all statements of practice and
procedure which, although issued primarily for internal use, af-
fected the rights and duties of taxpayers.54 Today, the program
also includes procedural information that, while not affecting the
50. Treas. Reg. §§ 1.6662-3(a) (2003), 1.6662-4(d) (2003), 1.6694-2(b) (2003), and
1.6664-4 (1992). See also infra note 82 (discussing the evolution of the substantial author-
ity standard).
51. See Introduction to Internal Revenue Bulletin, supra note 27.
52. An example of this situation is Rauenhorst v. Comm’r, 119 T.C. 157 (2002). The
Tax Court, which previously had adopted a position contrary to the Service’s revenue rul-
ing, nonetheless required the Service to follow the revenue ruling position. Rauenhorst,
119 T.C. at 170-171. The court explained,
Although we do not question the validity of the opinions of this Court and the
Courts of Appeals upon which respondent relies, we are not prepared to allow
respondent’s counsel to argue the legal principles of those opinions against the
principles and public guidance articulated in the Commissioner’s currently out-
standing revenue rulings.
Id. (citations omitted).
53. C.C.D.M., supra note 4, 32.2.2.10(4) (Aug. 11, 2004).
54. Rev. Proc. 55-1, 1955-2 C.B. 897, superseded by Rev. Proc. 89-14, 1989-1 C.B. 814.
Spring 2008 The Four R’s Revisited 337
rights and duties of taxpayers or others, the Service nevertheless
determines should be a matter of public knowledge.55
Revenue procedures are issued principally by the Associate
Chief Counsel Offices in the Office of Chief Counsel, published in
the Internal Revenue Bulletin, and compiled annually in the Cu-
mulative Bulletin.56 The stated practice of the Service is to pub-
lish as much of the internal management documents or communi-
cation as necessary to understand the procedure at issue.57 When
publication of the substance of a revenue procedure is required by
the Administrative Procedure Act,58 it has historically been ac-
complished by an amendment of the Statement of Procedural
Rules, found at 26 C.F.R. Part 601.59 This is usually done for gen-
erally applicable procedures that are to have continuing force and
effect.
The primary objectives of revenue procedure publication are the
promotion of uniform application of the tax laws by Service em-
ployees and the provision of assistance to taxpayers for the pur-
pose of maximizing voluntary compliance with the revenue laws.60
As originally conceived, the scope of revenue procedures included
all statements of practices, procedures, or regulations not other-
wise captured by revenue rulings or regulations, including Treas-
ury Decisions.61 Today, revenue procedures cover a wide array of
administrative and procedural matters, including procedures re-
lating to the adoption of new accounting methods, requests for
private letter rulings or revenue rulings, and methods of electronic
filing.62 They also serve an important function, as do notices, in
keeping the public informed of certain transactions that the Ser-
vice may closely scrutinize.63
55. Treas. Reg. § 601.601(d) (1987); Rev. Proc. 89-14, supra note 54, § 3(02).
56. Treas. Reg. § 601.601(d) (1987).
57. Id. § 601.601(d)(2)(vi).
58. 5 U.S.C. § 552 (2000).
59. Rev. Proc. 89-14, 1989-1 C.B. 814, § 7(2).
60. Id. § 5.
61. Rev. Proc. 55-1, supra note 54, § 2.
62. See, e.g., Rev. Proc. 2007-17, 2007-1 C.B. 368 (setting forth procedures for the Pre-
Filing Agreement Program, under which Large and Mid-Sized Business taxpayers may
request examination of specific issues relating to tax returns before returns are filed); Rev.
Proc. 2003-40, 2003-1 C.B. 1044 (establishing the Fast Track Settlement program to expe-
dite case resolution and to expand the range of dispute resolution options available to tax-
payers).
63. See, e.g., Rev. Proc. 2007-20, 2007-1 C.B. 517 (modifying and superseding Rev. Proc.
2004-65, 2004-50 I.R.B. 965); Rev. Proc. 2004-66, 2004-2 C.B. 966; Rev. Proc. 2004-67, 2004-
2 C.B. 967; Rev. Proc. 2004-68, 2004-2 C.B. 969.
338 Duquesne Law Review Vol. 46
Reliance and Revocation
The Service is generally bound to adhere to the procedural rules
it sets forth as revenue procedures in administrative matters.64
As a statement published for the purpose of informing taxpayers
of Service procedures affecting them, revenue procedures are simi-
lar in effect to revenue rulings. As with revenue rulings, revenue
procedures provide recognized authority for the possible defense of
the negligence and substantial understatement penalties provi-
sions of sections 6662 and 6664.65 Revenue procedures do not,
however, typically address matters that affect the rights and du-
ties of taxpayers, so they would generally not be useful to taxpay-
ers in planning transactions or determining positions to be taken
on returns.66
Given the similarity of the purposes of revenue procedures and
revenue rulings, the Commissioner has the same ability to revoke
the positions stated in revenue procedures as he has to revoke
those stated in revenue rulings.67 However, as statements of the
administrative procedures the Service follows, revenue procedures
are not generally revoked, but instead modified prospectively.
64. See Treas. Reg. § 601.601(d) (1987) (revenue procedures are published in order to
promote the correct and uniform interpretation of the law by Service employees). See also
I.R.M., supra note 27, 4.10.7.2.6 (Jan. 1, 2006) (describing the effect of revenue procedures);
Dillon, Read & Co. v. United States, 875 F.2d 293 (Fed. Cir. 1989) (citing Eli Lilly & Co. v.
Comm’r, 856 F.2d 855, 865 (7th Cir. 1988)) (failure to revoke a revenue procedure gives rise
to a reasonable expectation that the statements made in it have continued validity). See
generally C.C.D.M., supra note 4, 32.2.2.2(1) (Aug. 11, 2004) (stating that a purpose of
revenue procedures is to ensure correct and uniform application of tax law by Service per-
sonnel).
65. Treas. Reg. §§ 1.6662-3(a) (2003), 1.6662-4(d) (2003), 1.6694-2(b)(1992), and 1.6664-
4 (2003). See also infra note 82 (discussing the evolution of the substantial authority stan-
dard).
66. Courts have found that revenue procedures providing procedural rules promulgated
by the Commissioner without approval of the Treasury Department are internal procedural
guides that do not confer rights upon taxpayers. Boulez v. Comm’r, 810 F.2d 209, 215 (D.C.
Cir. 1987); Ward v. Comm’r, 784 F.2d 1424 (9th Cir. 1986); Rosenberg v. Comm’r, 450 F.2d
529 (10th Cir. 1971); Vosters v. United States, 1989 WL 90554 (N.D. Cal. 1989); Noske v.
United States, 1988 WL 146612 (D. Minn. 1988). But see Dillon, Read & Co., Inc. v. United
States., 875 F.2d 293 (Fed. Cir. 1989) (citing Eli Lilly & Co. v. Comm’r, 856 F.2d 855 (7th
Cir. 1988)) (Commissioner may not take a position in litigation repudiating the position in
a revenue procedure properly characterized as a substantive statement).
67. See Capitol Fed. Sav. & Loan Ass’n & Subsidiary v. Comm’r, 96 T.C. 204 (1991);
Lansons, Inc. v. Comm’r, 69 T.C. 773 (1978), nonacq., action on dec., 1979-155, 1979 WL
53184 (July 9, 1979), aff’d, 622 F.2d 774 (5th Cir. 1980) (retroactive revocation of long-
standing revenue procedure regarding situations in which rulings would be revoked would
be an abuse of the Commissioner’s discretion). See also discussion of the Commissioner’s
ability to revoke revenue rulings, supra at page 335.
Spring 2008 The Four R’s Revisited 339
Announcements and Notices
The Service often resorts to notices and announcements, rather
than other kinds of guidance, when there is need for guidance on
an expedited basis. Oftentimes the matter is already the subject
of some more formal type of guidance, such as a revenue ruling or
revenue procedure, but the desire to issue immediate guidance
outweighs the benefit of attempting to modify the original pro-
nouncement.68
A notice, which is published in the Internal Revenue Bulletin
and compiled annually in the Cumulative Bulletin, contains guid-
ance that involves substantive interpretations of the Code or other
provisions of law.69 Topics can include changes to forms70 or to
other previously published materials,71 solicitation of public com-
ments on issues under consideration,72 and advance notice of rules
to be provided in regulations when the regulations may not be
published in the immediate future.73 Increasingly, notices have
served as a critical component of the Service’s efforts to combat
abusive tax avoidance transactions, as they have been used to
identify transactions about which the Service has concerns. Given
the rapid pace of developments in this area, notices have proven
particularly useful for quickly disseminating information that al-
lows taxpayers to understand exactly which transactions will be of
68. See generally I.R.M., supra note 27, 4.10.7.2.4.1(1)(a) (Jan. 1, 2006) (discussing the
usefulness of announcements where expedited guidance is required).
69. C.C.D.M., supra note 4, 32.2.2.3.3(1) (Aug. 11, 2004); I.R.M., supra note 27,
4.10.7.2.4.1(1)(b) (Jan. 1, 2006).
70. See, e.g., Revision of Forms 8898 and 8840, I.R.S. Notice 2006-73, 2006-2 C.B. 339
(effecting interim revisions to Form 8898, Statement for Individuals Who Begin or End
Bona Fide Residence in a U.S. Possession, and Form 8840, Closer Connection Exception
Statement for Aliens, by instructing those filing the forms to disregard certain line items
until such time the Service publishes revised forms).
71. See, e.g., Certification of Energy Efficient Home Credit, I.R.S. Notice 2008-35, 2008-
12 I.R.B. 647 (clarifying and superseding I.R.S. Notice 2006-27 by substantially republish-
ing the guidance provided in the earlier notice); Qualified Payment Card Agent Determina-
tion, I.R.S. Notice 2007-59, 2007-30 I.R.B. 135 (providing a proposed revenue procedure by
which a payment card organization would request a determination that it is a Qualified
Payment Card Agent, superseding Rev. Proc. 2004-42, 2004-2 C.B. 121 (August 2, 2004)).
72. See, e.g., Cell Captive Insurance Arrangements: Insurance Company Characteriza-
tion and Certain Federal Tax Elections, I.R.S. Notice 2008-19, 2008-5 I.R.B. 366 (request-
ing comments on a specific framework for determining whether an individual cell or the
protected cell company as a whole is treated as an insurance company for federal income
tax purposes).
73. See, e.g., Reissuance Standards for State and Local Bonds, I.R.S. Notice 2008-27,
2008-10 I.R.B. 543 (providing interim guidance in advance of regulations to issuers of state
and local bonds to clarify when certain tax-exempt bonds are treated as reissued or retired
for purposes of I.R.C. §§ 103, 141-150).
340 Duquesne Law Review Vol. 46
interest to the Service, including so-called “listed transactions”74
and “transactions of interest,”75 both of which are “reportable
transactions” under section 6011.76
Announcements are also published in the Internal Revenue Bul-
letin and contain matters of general interest, such as effective
dates of temporary regulations, clarification of rulings, or modifi-
cation of form instructions.77 Announcements can provide guid-
ance of both a substantive and procedural nature, frequently of
only immediate or short-term value.78 Announcements may serve
to summarize the Code or regulations without making any sub-
74. A listed transaction is a transaction that the Service has determined is a tax avoid-
ance transaction for the purpose of triggering the registration and disclosure requirements
of section 301.6111-2(b)(2) of the Procedure and Administration Regulations. Treas. Reg.
§ 1.6011-4(b)(2) (2007). See e.g., Listed Transactions, I.R.S. Notice 2004-67, 2004-2 C.B.
600 (setting out transactions that have been identified as listed transactions); Loss Impor-
tation Transaction, I.R.S. Notice 2007-57, 2007-29 I.R.B. 87 (identifying as a listed transac-
tion those transactions in which a U.S. taxpayer uses offsetting positions with respect to
foreign currency or other property for the purpose of importing a loss, but not the corre-
sponding gain, in determining U.S. taxable income); and Notification of Removal of the
Transaction With a Significant Book-Tax Difference Category of Reportable Transaction
Under § 1.6011-4, I.R.S. Notice 2006-6, 2006-1 C.B. 385 (announcing the removal of the
book-tax difference category of reportable transactions).
75. A transaction of interest is one the Service believes has potential for tax avoidance
or evasion, but for which the Service lacks enough information to determine whether the
transaction should be identified specifically as a tax avoidance transaction. See Treas. Reg.
§ 1.6011-4(b)(6) (2007); I.R.C. §§ 6111, 6112 (Supp. V 2005). Transactions of interest are
identified in notices. See, e.g., Transaction of Interest – Contribution of Successor Member
Interest, I.R.S. Notice 2007-72, 2007-36 I.R.B. 544 (identifying contributions of successor
member interests as a transaction of interest); Transaction of Interest – Toggling Grantor
Trust, I.R.S. Notice 2007-73, 2007-36 I.R.B. 545 (identifying the toggling of grantor trusts
as a transaction of interest). Just as the Service identifies transactions that qualify for
reporting, it also removes certain transactions from the reporting requirements. See, e.g.,
Lease Exception to the Tax Shelter Regulations, I.R.S. Notice 2001-18, 2001-1 C.B. 731
(providing an exception from registration and list maintenance requirements for certain
leasing transactions).
76. The Service has currently identified six categories of reportable transactions: (1)
listed transactions; (2) confidential transactions; (3) transactions with contractual protec-
tions; (4) loss transactions; (5) transactions of interest; and (6) transactions involving a
brief asset holding period. Treas. Reg. § 1.6011-4(b) (2007). The Service has relied on no-
tices to help define the context and nature of these transactions and to expand or contract
the universe of reportable transactions. See, e.g., Listed Transactions, I.R.S. Notice 2004-
67, 2004-2 C.B. 600; Loss Importation Transaction, I.R.S. Notice 2007-57, 2007-29 I.R.B. 87
(identifying as listed transactions those in which a U.S. taxpayer uses offsetting positions
with respect to foreign currency or other property for the purpose of importing a loss, but
not the corresponding gain, in determining U.S. taxable income); Notification of Removal of
the Transaction With a Significant Book-Tax Difference Category of Reportable Transac-
tion Under Treas. Reg. § 1.6011-4, I.R.S. Notice 2006-6, supra note 74 (announcing the
removal of the book-tax difference category of reportable transactions).
77. I.R.M., supra note 27, 4.10.7.2.4.1(1)(a) (Jan. 1, 2006). In recent years, the Service
has begun compiling announcements in the Cumulative Bulletin.
78. C.C.D.M., supra note 4, 32.2.2.3.4(1) (Aug. 11, 2004).
Spring 2008 The Four R’s Revisited 341
stantive interpretation or they may provide explanations for
newly-adopted Service policies or programs.79
Reliance and Revocation
Taxpayers may generally rely on announcements and notices to
the same extent as revenue rulings and revenue procedures.80 If
on point, these pronouncements bind the Service in its adminis-
trative actions and represent statements of position on which tax-
payers may rely.81 As with revenue rulings and revenue proce-
dures, announcements and notices can provide substantial author-
ity sufficient to relieve taxpayers from the negligence and sub-
stantial understatement penalties and, consequently, may be rele-
vant to whether certain penalty provisions apply.82
79. Id. See, e.g., Request for Tax Accrual and Other Financial Audit Workpapers, I.R.S.
Announcement 2002-63, 2002-2 C.B. 72 (announcing that the Service revised its policy
concerning requests for tax accrual workpapers); Compliance Assurance Process, I.R.S.
Announcement 2005-87, 2005-2 C.B. 1144 (announcing the Compliance Assurance Process
pilot program for large business taxpayers, with the objective of reducing taxpayer burden
and uncertainty while assuring the Service of the accuracy of tax returns prior to filing,
reducing or eliminating the need for post-filing examinations).
80. Rev. Rul. 87-138, 1987-2 C.B. 287; I.R.M., supra note 27, 4.10.7.2.4.1(1)(a)-(b) (Jan.
1, 2006).
81. See supra pages 335, 338 (discussing reliance and retroactivity in the sections on
revenue rulings and revenue procedures).
82. The addition to tax under I.R.C. § 6662 for substantial understatements of income
can be limited if there is substantial authority for a filing position taken by a taxpayer.
I.R.C. § 6662(d)(2)(B) (2000). The Tax Equity and Fiscal Responsibility Act of 1982 first
established the standard of “substantial authority” to provide relief from the penalty for
substantial understatement of income. Pub. L. No. 97-248, § 323(a), 96 Stat. 324 (1982).
Regulations under prior I.R.C. § 6661 and the pertinent Committee Reports offered a lim-
ited list of authorities that would constitute substantial authority for purpose of relieving
taxpayers from application of I.R.C. § 6661. H.R. REP. NO. 97-760, at 575 (2d sess. 1982)
(Conf. Rep.), reprinted in U.S.C.C.A.N.; accord Treas. Reg. § 1.6661-3(a)(2). This list in-
cluded, among other items, “administrative pronouncements,” but that group of authority
was limited, by definition, to revenue rulings and revenue procedures. The Service ex-
panded the list of authorities in 1987, announcing that tax practitioners could rely on No-
tices and Announcements just as they rely on revenue rulings and revenue procedures.
Rev. Rul. 87-138, supra note 80, superseded by Rev. Rul. 90-91, 1990-44 I.R.B. 11. Notices
and Announcements issued by the Service were later deemed to serve as “administrative
pronouncements” as that term is used in Treas. Reg. § 1.6661-3(b)(2). See, e.g., I.R.S. No-
tice 88-22, 1988-1 C.B. 489; I.R.S. Notice 88-5, 1988-1 C.B. 476; I.R.S. Announcement 88-
16, 1988-5 I.R.B. 28. The Omnibus Budget Reconciliation Act of 1989 made several sub-
stantial revisions to the penalties regime. Pub. L. No. 101-239, 103 Stat. 2106 (1989). The
“substantial authority” standard is now an objective standard, involving an analysis of the
law and application of the law to relevant facts. The weight of authorities supporting the
tax treatment must be substantial in relation to the authorities supporting contrary posi-
tions. The weight to be accorded an authority depends on its relevance, its persuasiveness,
and the type of document providing the authority. Treas. Reg. § 1.6662-4(d)(3)(ii) (2003).
Treas. Reg. § 1.6662-4(d)(3)(iii) (2003) identifies the authorities to be considered in deter-
mining whether there is substantial authority for the tax treatment of an item. The list
includes revenue procedures; Actions on Decisions (AOD) issued after March 12, 1981;
342 Duquesne Law Review Vol. 46
The Service does not administratively revoke notices or an-
nouncements. Since these types of guidance are intended to pro-
vide information to taxpayers, a new notice or announcement pro-
viding updated information is issued when necessary.83
IV. LETTER RULINGS PROGRAM
Letter Rulings
Regulations and other forms of published guidance are written
as a general guide to interpretation and are not necessarily in-
tended to answer each and every specific problem. For many tax-
payers, the material contained in published guidance is sufficient
for their purposes, supplying the knowledge to enable them to de-
termine the tax consequences of their transactions. Taxpayers are
often involved in complex financial transactions or transactions
involving intricate fact patterns that are not clearly covered by the
regulations. To enable these taxpayers to gain advance knowledge
as to the Service’s position, the letter rulings program was devel-
oped.
The present letter rulings program is another example of man’s
inventive genius operating in response to his needs. It was devel-
oped to provide certainty as to the tax consequences of contem-
plated transactions and remains concrete proof of the fact that
even an agency as vast as the Service can be responsive to the
needs of the public. The Service’s letter rulings program is one of
the largest and oldest programs in the Government. Each year
several thousand letter rulings are issued to taxpayers.
Definition
A letter ruling is a written statement issued to a taxpayer by an
Associate Chief Counsel Office of the Office of Chief Counsel or by
the Tax Exempt and Government Entities Division that interprets
and applies the tax laws to a specific set of facts.84 Rulings are
notices; and announcements. Notice 90-21 provides additional guidance on what consti-
tutes substantial authority under the present regime. See Accuracy-Related Penalty In-
come Tax Return Preparer Penalty, I.R.S. Notice 90-21, 1990-1 C.B. 332, § V(A).
83. See, e.g., I.R.S. Notice 2006-6, supra note 74.
84. C.C.D.M., supra note 4, 32.3.1.1(2) (Aug. 11, 2004). The Office of Chief Counsel
currently has seven Associate Chief Counsel Offices that issue letter rulings on issues
within their subject matter. These offices are the Office of the Associate Chief Counsel
(Corporate), Office of the Associate Chief Counsel (Financial Institutions and Products),
Office of the Associate Chief Counsel (Income Tax and Accounting), Office of the Associate
Spring 2008 The Four R’s Revisited 343
issued only by these offices and are generally issued in respect to
transactions that have not been consummated.85
Although the letter rulings program directly affects only a com-
paratively small percentage of taxpayers, it has a broad impact on
our national economy and on proper and reasonable tax admini-
stration.86 Just as consulting the tax specialist is a way of life in
business transactions, so too is obtaining a favorable tax ruling.87
A private letter ruling has been described as a policy of insur-
ance88 that is a practical prerequisite to a merger of corporate gi-
ants.89 The Service has restricted the areas in which it will pro-
vide letter rulings, preferring not to devote scarce resources to is-
suing so-called “comfort rulings.”90 “Comfort rulings” concern ar-
eas that the Service views as adequately addressed in existing
authority such as case law or published guidance. In other words,
the “policies of insurance” described above may not be available
when the Service deems them unnecessary. As one group has ob-
served, however, “[t]he private letter ruling program . . . will con-
tinue to play a significant role in assisting taxpayers and their
advisors in coping with the complexity of the tax system.”91
The letter rulings program is advantageous to both the Service
and the taxpayer. It benefits the taxpayer by
Chief Counsel (International), Office of the Associate Chief Counsel (Passthroughs and
Special Industries), Office of the Associate Chief Counsel (Procedure and Administration),
and Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government
Entities). See Rev. Proc. 2008-1, 2008-1 I.R.B. 1.
85. I.R.S. Deleg. Order No. 190 (Rev. 4), I.R.M. 1.2.53.5 (Oct. 8, 1996).
86. See I.R.S. Tech. Info. Rel. 610 (July 9, 1964); Goodstein v. Comm’r, 267 F.2d 127
(1st Cir. 1959); Int’l Bus. Machines Corp. v. United States, 343 F.2d 914, 925 (Ct. Cl. 1965)
(Cowen, C.J., dissenting).
87. See Warwick, Fund Ruling Withdrawn; IRS Policy Questioned, 19 J. TAX’N 197
(1963); Stephen M. Goodman, Note, The Availability and Reviewability of Rulings of the
Internal Revenue Service, 113 U. PA. L. REV. 81, 84-86 (1964).
88. Taylor, supra note 30, at 72.
89. Study has also been devoted to the question of when to seek a ruling. Many factors
enter into this, such as whether there is sufficient time to request the ruling, the probabil-
ity that the ruling will be adverse, and the possible effects of an adverse ruling. See Taylor,
supra note 30, at 72-73 (suggesting that a ruling ought not to be requested where the prob-
ability of an adverse answer is high, and noting that even though the request for ruling is
withdrawn the national office may furnish its views to the Service official in whose office
the return has been or will be filed). See also Rev. Proc. 2008-4, 2008-1 I.R.B. 121 (discuss-
ing withdrawal of requests for rulings). On the other hand it has been suggested that “get-
ting an unfavorable ruling has some advantages too. Perhaps the proposed transaction can
be revamped to meet the IRS objections. At the very least it permits the parties to bargain
with full knowledge of the possibility of tax litigation.” Yager, When and How Should the
Practitioner Ask for Rulings and Technical Advice?, 14. J. TAX’N 38 (1961).
90. Rev. Proc. 2008-1, § 6.11, 2008-1 I.R.B. 1, 15.
91. Donald E. Osteen, Nelson F. Crouch & Phoebe Bennett, Obtaining Private Guid-
ance From the Internal Revenue Service, in U.S.C. TAX LAW INST. 17-1 (2002).
344 Duquesne Law Review Vol. 46
(1) informing the taxpayer of the Service’s position, which
enables the taxpayer to make a determination of whether or
not to consummate the contemplated transaction;
(2) enabling the taxpayer to choose a course of action that
will avoid future controversy and litigation with the Service;
and
(3) enabling the taxpayer to properly report the transaction
once consummated, thereby promoting voluntary compliance.
The rulings program is not a one-way street, however, and the
Service similarly receives its share of the benefits:
(1) letter rulings provide a high degree of uniformity in the
application of the law and regulations because all rulings on
prospective transactions, other than those concerned with
qualification of exempt organizations and employee benefit
plans, are issued by the Associate Chief Counsel Offices;
(2) advance rulings tend to decrease the amount of litigation
that the Service otherwise would be involved in;
(3) the rulings program constitutes a source of valuable in-
formation to the Service by keeping it abreast of the kinds of
transactions which are being consummated or considered by
taxpayers;
(4) the rulings program still serves as one basis for the pub-
lished rulings progam; and
(5) the work of the auditing agents is also simplified. They
need only verify that the facts of the consummated transac-
tions correspond to the facts in the rulings.
History
The necessity for advance rulings as to prospective transactions
was first recognized by Congress in 1938,92 when it gave the Com-
missioner authority to enter into binding closing agreements with
respect to prospective transactions.93 By 1940, the closing agree-
92. For the early history of the rulings program, see Caplin, supra note 34. A more
abbreviated history can be found in Osteen, Crouch & Bennett, supra note 91.
93. See Revenue Act of 1938, ch. 289, § 801, 52 Stat. 447, 573, amending 606(a) of the
Revenue Act of 1928, ch. 852, 45 Stat. 874.
Spring 2008 The Four R’s Revisited 345
ment procedure was recognized as too cumbersome a vehicle to
handle the volume of requests and proved to be generally unsatis-
factory to both the Service and the taxpayer.94 This resulted in
the initiation of the letter rulings program, under which requests
for rulings were treated as potential requests for closing agree-
ments. The letter sent to the taxpayer in reply to his request, in
essence, stated what the Service would do if the taxpayer re-
quested a formal closing agreement, thus representing an “agree-
ment to agree.”95 However, it was not until 1953 that the Service
formally announced the existence of the letter rulings program.96
Since 1953, the letter ruling program has gone through many
changes. For thirty years, the program was administered by the
Service. Then, in 1984, responsibility for the majority of the pro-
gram was transferred to the Office of Chief Counsel. The Service’s
Corporate and Individual Tax Divisions, charged with administer-
ing the ruling program, were transferred from the Service to the
Office of Chief Counsel. The Employee Plans and Exempt Organi-
zations Division, however, remained part of the Service. Thus, the
rulings program for those areas remains part of the Tax Exempt
and Government Entities operating division today.97 Five years
later, Chief Counsel’s national office was reorganized by subject
matter. Each division became responsible for all forms of guid-
ance and advice within its subject matter jurisdiction. For exam-
ple, the Associate Chief Counsel (Corporate) issues all letter rul-
ings and Technical Advice Memoranda98 related to corporate reor-
ganizations and prepares all regulations, revenue rulings, and
other published guidance in the same area.99
94. See Caplin, supra note 34.
95. No statutory provision requires the Commissioner to rule in all cases. Rulings are
mandatory under certain sections of the Code, for example, I.R.C. §§ 367 (2000 & Supp. V
2005), 446(c) (2000), and 706(b)(1) (2000). Absent such requirement, the Commissioner
derives his general authority to issue rulings under I.R.C. § 7805(a) (2000), a provision that
vests discretionary authority in the Commissioner to provide “all needful rules and regula-
tions for the enforcement of” the Code. See Caplin, supra note 34, at 7-8.
96. Rev. Rul. 10, 1953-1 C.B. 488.
97. See Rev. Proc. 2008-4, supra note 89.
98. The procedures governing Technical Advice memoranda are discussed below. See
infra pages 354-56.
99. The procedures for seeking a letter ruling are customarily published in the first
revenue procedure each year. See, e.g., Rev. Proc. 2008-1, supra note 84. A pre-submission
conference may be held at the discretion of the Associate Chief Counsel Office between the
Associate Chief Counsel Office, the taxpayer and any representative of the taxpayer to
discuss substantive or procedural aspects of the request. Id. § 10.07. The taxpayer gener-
ally has only one conference of right with the Associate Chief Counsel Office, unless that
office proposes to rule adversely to the taxpayer on an issue or grounds other than those
discussed at the conference of right. Id. §§ 10.02, 10.05.
346 Duquesne Law Review Vol. 46
Another major change lies in the area of the public release of
letter rulings. Historically, the Service was very reluctant to re-
lease letter rulings publicly. To appreciate the Service’s reluc-
tance to publish all rulings, it is necessary to understand the na-
ture of a letter ruling as a communication. The letter ruling was
developed to provide taxpayers with definite and reliable determi-
nations as to the tax treatment of future transactions. This was
achieved by creating a form of communication that was addressed
to an individual taxpayer and concerned one particular transac-
tion. By so doing, the Service limited the scope of the ruling and,
accordingly, limited its risk. Responsibility for issuing rulings in
such cases could be delegated to lesser officials.
The letter rulings program must also be able to operate within a
wide area of the law. If it is to be effective, the Service must be
prepared to rule not only on questions that fall within the black or
white areas, but those questions that fall within the gray areas
too.100 Through the medium of the letter ruling and its limited
exposure, the Service can, within a short period of time, issue a
letter ruling in a case of first impression in a gray area. As addi-
tional ruling requests in this same area are received, the Service
can develop a mature view of the problem. It is this mature con-
sideration of a problem—a study of all the possible ramifications
of the Service’s position—that is finally reflected in the published
rulings of the Service. In the published rulings program, the Ser-
vice has the opportunity to convert what was once a gray area into
a clear rule to guide all taxpayers.
The letter ruling program represents a fair balance between the
present need of taxpayers for advance, rapid, and reliable infor-
mation in regard to future transactions and the need of the Ser-
vice to limit both the possible loss to the revenue resulting from a
mistake in interpretation and the difficulties that might result
from a premature freezing of Service position.101
100. There are certain areas in which rulings will not be issued, set forth in a “no-ruling
list.” This list was first published in 1960 as Rev. Proc. 60-6, 1960-1 C.B. 880, and has been
revised and reissued periodically since then. Two Revenue Procedures are published annu-
ally detailing the “no rule” areas with respect to domestic issues and international issues.
See, e.g., Rev. Proc. 2008-3, 2008-1 I.R.B. 110; Rev. Proc. 2008-7, 2008-1 I.R.B. 229. The no-
ruling list contains both specific areas in which the Service will not rule, and areas in
which the Service generally will not rule. This list may be regarded more as a convenience
for taxpayers than as an articulation of the Commissioner’s policies offered for public scru-
tiny and censure. In general, public response to this program of publishing the no-ruling
list has been most favorable. See Goodman, supra note 87; Caplin, supra note 34, at 14-16.
101. Section 6110 of the Internal Revenue Code provides that, except to the extent oth-
erwise provided in regulations, taxpayers may not rely on letter rulings issued to other
Spring 2008 The Four R’s Revisited 347
In 1977, however, the Service began releasing letter rulings af-
ter the enactment of section 6110.102 This section was prompted
by the outcome of two lawsuits seeking letter rulings and technical
advice memoranda under the Freedom of Information Act.103 In
both lawsuits, the courts agreed that letter rulings should be
made public; however, the courts disagreed whether technical ad-
vice memoranda should be made public. In response to these law-
suits and the Service’s proposed rules to publicize rulings in 1976,
Congress enacted section 6110 to require that written determina-
tions (including rulings) be open for public inspection.104 To pre-
serve taxpayer confidentiality, section 6110 requires the Service to
work with the taxpayers to ensure that their identifying informa-
tion is redacted from the public versions of the letter rulings.
Another major change to the letter ruling program occurred in
1987, when Congress required the Service to develop a user fee
program for letter rulings.105 The fees are based on calculations of
the actual cost to the Service of preparing the rulings. At the out-
set of the program, the fee was $300.106 Now, the fee has risen to
$11,500 for a letter ruling, with discounted fees for lower income
taxpayers.107
Reliance and Retroactivity of Letter Rulings
The policy of the Service to permit and encourage taxpayer reli-
ance on letter rulings is clearly reflected by the change in lan-
guage between the present statement of policy and that first is-
sued in 1954.108 Initially, the policy was to make revocation “gen-
erally” prospective. The present statement of Service policy, con-
tained in Revenue Procedure 2008-1, makes a stronger case for
reliance upon letter rulings by providing for retroactivity upon
taxpayers. I.R.C. § 6110(k)(3) (2000); see also Rev. Proc. 2008-1, supra note 84, § 11.02
(same). As discussed below, both before and after the enactment of this provision, courts
have generally refused to allow taxpayers to rely on letter rulings issued to unrelated tax-
payers.
102. Pub. L. No. 94-455, 90 Stat. 1520 (1976) (codified as amended at I.R.C. § 6110
(2000)).
103. Fruehauf Corp. v. Internal Revenue Serv., 522 F.2d 284 (6th Cir. 1975) (subsequent
history omitted); Tax Analysts v. Internal Revenue Serv., 505 F.2d 350 (D.C. Cir. 1974).
104. Tax Reform Act of 1976, Pub. L. No. 94-455, § 1201(a), 90 Stat. 1520 (1976) (codified
as amended at I.R.C. § 6110 (2000 & Supp. V 2005)).
105. Revenue Act of 1987, Pub. L. No. 100-203, § 10511, 101 Stat. 1330, 1987-3 C.B. 1
(an off-code provision subsequently codified at I.R.C. § 7528 (Supp. V 2005)).
106. Rev. Proc. 88-8, 1988-1 C.B. 628.
107. Rev. Proc. 2008-1, supra note 84, app. A.
108. Rev. Rul. 54-172, 1954-1 C.B. 394.
348 Duquesne Law Review Vol. 46
revocation only in “unusual circumstances.”109 However, it must
be emphasized that only the taxpayer to whom the letter ruling is
addressed is entitled to rely upon the ruling.110 It has long been
the policy of the Service, a policy supported by numerous court
decisions, to limit reliance upon letter rulings to the recipient of
the ruling.111 Only in some unusual and very limited circum-
stances has a taxpayer been allowed to rely on letter rulings is-
sued to another taxpayer.112
At the same time that Congress required the Service to release
letter rulings to the public, it also addressed the Service’s major
concern regarding their release; namely, taxpayers other than the
recipient of the ruling would rely on the letter rulings. Section
6110(k)(3) provides that letter rulings may not be used or cited as
precedent unless a regulation has been issued allowing such reli-
ance.113 The only regulations that come close to allowing reliance
are the penalty regulations under section 6662. These regulations
provide that letter rulings issued after 1976 may be considered in
determining whether a taxpayer’s position is supported by sub-
stantial authority and, hence, not subject to penalty for a substan-
tial understatement.114
Present practice holds that a letter ruling found to be in error or
no longer in accord with position of the Service may be modified or
revoked.115 It is, however, only in rare or unusual circumstances
that such modification or revocation will be retroactive in effect. A
change in Service position will be prospective if
109. Rev. Proc. 2008-1, supra note 84, § 11.07.
110. Id. § 11.03.
111. E.g., Minchin v. Comm’r, 335 F.2d 30 (2d Cir. 1964); Goodstein v. Comm’r, 267 F.2d
127 (1st Cir. 1959); Bornstein v. United States, 345 F.2d 558 (Ct. Cl. 1965).
112. E.g., Int’l Bus. Machines v. United States, 343 F.2d 914 (Ct. Cl. 1965) (allowing
IBM to rely on a favorable letter ruling issued to its sole competitor, Remington Rand, after
the Service denied IBM’s request for a similar ruling).
113. I.R.C. § 6110(k)(3) (2000).
114. Treas. Reg. § 1.6662-4(d)(3)(iii) (2003). See supra note 82 for a fuller discussion of
the issue of what constitutes substantial authority sufficient to relieve taxpayers from the
application of I.R.C. § 6662.
115. A letter ruling may be revoked without direct notice to the taxpayer. Rev. Proc.
2008-1, supra note 84, § 11.04. A change in the applicable statutory law or amendment of
the regulations has the effect of an automatic revocation to the extent that the letter ruling
is inconsistent with the amended statute or regulation. Id. Letter rulings may also be
revoked or modified by direct letter to the taxpayer—a procedure which is ordinarily not
possible—or by publication in the Internal Revenue Bulletin of a ruling or regulation stat-
ing a position different than that in the letter ruling issued to the taxpayer. Id. See Cap-
lin, supra note 34, at 22.
Spring 2008 The Four R’s Revisited 349
(1) there has been no misstatement or omission of material
facts;
(2) the facts subsequently developed are not materially differ-
ent from the facts upon which the ruling was based;
(3) there has been no change in the applicable law;
(4) the ruling was originally issued with respect to a prospec-
tive or proposed transaction; and
(5) the taxpayer acted in good faith in reliance upon such rul-
ing and a retroactive revocation would be to his detriment.116
Closing Agreements
Closing agreements are intended to resolve issues permanently.
The closing agreement binds both the taxpayer and the Service
according its terms absent fraud, malfeasance, or misrepresenta-
tion.117 The majority of closing agreements resolve issues that
arise during the examination of a taxpayer and are signed off by
Service field officials. Some closing agreements, however, are
used to resolve issues regarding prospective transactions or con-
cluded transactions before the return is filed. As described in the
letter ruling section above, the letter ruling program evolved out
of prospective closing agreements. Letter rulings, although gen-
erally binding on the Service, do not have the finality of closing
agreements. Moreover, because a letter ruling is less final, the
Service is not as concerned with verifying the facts of a transac-
tion for a ruling as it is before entering into closing agreement.
Therefore, a letter ruling can generally be issued in a shorter time
than can a closing agreement. But closing agreements are still
116. Rev. Proc. 2008-1, supra note 84, §§ 11.05-.06. There are a number of cases consid-
ering the question of reliance. See, e.g., Knetsch v. United States, 348 F.2d 932 (Ct. Cl.
1965) (transaction consummated prior to acts constituting basis for claim of reliance);
Bornstein, 345 F.2d 558 (reliance not proved). Few cases have analyzed the question of how
to define detriment. Schuster v. Commissioner analyzes this problem in relation to a claim
of equitable estoppel made by a trustee bank and the trust beneficiary in an estate tax case.
312 F.2d 311 (9th Cir. 1962). The court held that the bank, which had distributed the
corpus of a trust to the beneficiary in reliance upon the Commissioner’s prior determination
that the trust was not part of decedent’s gross estate, had materially changed its position to
its detriment. Schuster, 312 F.2d at 318. On the other hand, the court held that the bene-
ficiary suffered no detriment in relying on the Commissioner's prior determination. Id.
Distribution of the trust assets to the beneficiary, who would have received such assets in
any event, could not be said to cause a material change in the beneficiary's position. Id.
117. I.R.C. § 7121 (2000).
350 Duquesne Law Review Vol. 46
occasionally used for prospective transactions. Sometimes tax-
payers request closing agreements instead of letter rulings be-
cause they seek a greater degree of finality. At other times, the
Service will insist on a closing agreement as a condition of issuing
a letter ruling.
Prospective closing agreements must be signed in the national
office.118 Closing agreements are not written determinations sub-
ject to public inspection under section 6110119 and, except as may
be otherwise authorized by the Code (e.g., by section 6104), closing
agreements are exempt from disclosure under section 6103.120
Because closing agreements are not generally released to the pub-
lic, the issue of reliance by an unrelated taxpayer on the terms of a
closing agreement rarely arises.
There are two specific Service programs that use closing agree-
ment mechanisms to resolve issues prospectively: the Advanced
Pricing Agreement (APA) program and the Prefiling Agreement
(PFA) program.
Advanced Pricing Agreements
The APA program originated in 1991.121 The agreements re-
solve transfer pricing issues with multinational corporations for
future years.122 Prior to the development of APAs, transfer pricing
was a frequent issue in litigation, requiring extensive factual de-
velopment, numerous experts, and years to reach final results.
During the course of this litigation, neither the Service nor the
taxpayer would have any certainty regarding the resolution of the
issue. APAs are designed to preempt the need for such costly liti-
gation and to provide certainty for both the multinational taxpay-
ers and the Service for future years. Like other closing agree-
ments, APAs are exempt from disclosure.123
118. I.R.S. Deleg. Order No. 97 (Rev. 34), I.R.M., supra note 27, 1.2.47.6 (Aug. 18, 1997).
119. S. REP. NO. 94-938, at 306-07 (2d sess. 1976).
120. Tax Analysts v. Internal Revenue Serv., 410 F.3d 715 (D.C. Cir. 2005). There, the
court found that the closing agreement between the Service and the Christian Broadcasting
Network was not material submitted in support of its application for tax exemption, upon
which the Service made its determination that the Christian Broadcasting Network was
entitled to exemption. Tax Analysts, 410 F.3d at 722. Accordingly, the closing agreement
was not authorized to be disclosed under I.R.C. § 6104 and remained confidential under
I.R.C. § 6103. Id.
121. Rev. Proc. 91-22, 1991-1 C.B. 526.
122. Rev. Proc. 2006-9, 2006-1 C.B. 278.
123. I.R.C. §§ 6103(b)(2)(C) (2000), 6110(b)(1)(B) (2000).
Spring 2008 The Four R’s Revisited 351
Prefiling Agreements
PFAs are a relatively recent program developed by the Service
to resolve issues with taxpayers after a transaction is consum-
mated but prior to the filing of the return. A pilot program was
announced in 2000.124 The program was judged a success in re-
solving contentious issues related to completed transactions and
has since been renewed periodically.125 Issues that are eligible for
PFAs are generally ones for which the law is well-settled, but may
require the resolution of factual disputes. While the original pro-
gram had strict limits on the years and the issues that could be
addressed, the current PFA program allows taxpayers to seek
PFAs for multiple years and a greater number of issues.126 Tax-
payers seeking a PFA must pay a user fee of $50,000.127
Determination Letters
Of lesser impact than the ruling program in interpreting the
Code is the determination letter program. A determination letter
is a written statement issued by the Service (rather than the Of-
fice of Chief Counsel) in response to an inquiry by an individual or
an organization. It applies to the particular facts involved and is
based upon principles and precedents previously announced by the
national office. Determination letters are issued only when a de-
termination can be made on the basis of clearly established rules
as set forth in the statutes, Treasury Decisions, or regulations, or
by rulings, opinions, or court decisions published in the Internal
Revenue Bulletin. Determination letters are issued in response to
taxpayers’ requests involving completed transactions in income,
profits, and gift tax matters.128
124. I.R.S. Notice 2000-12, 2000-1 C.B. 727.
125. I.R.S. Announcement 2002-54, 2002-1 C.B. 1190; Rev. Proc. 2001-22, 2001-1 C.B.
745, superseded by Rev. Proc. 2005-12, 2005-1 C.B. 311.
126. Rev. Proc. 2007-17, supra note 62. Rev. Proc. 2001-22, supra note 125, limited the
eligible years for the PFA program to current or prior taxable years for which returns were
neither due nor filed. Rev. Proc. 2005-12, 2005-1 C.B. 311, superseded by Rev. Proc. 2007-
17, supra, expanded the program in several ways. An eligible taxpayer could request a
PFA for the current taxable year, any prior taxable year for which the original return is not
yet due (taking into account any extensions of time to file) and is not yet filed and, with
some exceptions, for a limited number of future taxable years. PFAs could also be used to
determine the appropriate methodology for determining tax consequences affecting future
tax years. Finally, PFAs may now be obtained for certain international issues and issues
having “international implications.” Rev. Proc. 2007-17, supra, § 3.07.
127. Rev. Proc. 2007-17, supra note 62, § 10.
128. Rev. Proc. 2008-1, §§ 12-13, 2008-1 I.R.B. 1, 54; Rev. Proc. 2008-6, 2008-1 I.R.B. 192
(employee plans determination letters); Treas. Reg. § 601.201(c) (2002).
352 Duquesne Law Review Vol. 46
The most important use of determination letters in prospective
transactions is in the qualification of plans under I.R.C. § 401, the
related exempt status of trusts under I.R.C. § 501, and in deter-
mining the exempt status of organizations under I.R.C. §§ 501 and
521.129 Statistics are not kept on the number of determination
letters issued in income, profits, estate, and gift tax. However, in
Fiscal Year 2006, nearly 17,000 determination letters were issued
with respect to employee plans.130
Reliance and Revocation
The Service may revoke a determination letter upon reexamina-
tion or upon audit of a taxpayer’s return. In the income, profits,
estate, and gift tax area, such revocation is automatically retroac-
tive. If prospective application is desirable, the Service can refer
the matter to the Chief Counsel for exercise of his authority to
limit the modification or revocation under section 7805(b). The
revocation of a determination letter in the exempt organization
and employee benefit trust areas, however, is generally prospec-
tive, except for a few clearly defined situations.131
The rationale for retroactive revocation of determination letters
in the income, estate, and gift tax areas is simply that such a de-
termination letter is only issued as to a completed transaction.
Therefore, taxpayers could not have relied upon the determination
letter in entering into the transaction initially. Determination
letters as to exempt status, however, are relied upon by taxpayers
in connection with prospective transactions, and this accounts for
the difference in treatment.
Information Letters
An information letter is a statement, issued either by the Office
of Chief Counsel or by the Service, which does no more than call
attention to a well-established interpretation or principle of tax
law, without applying it to a specific set of facts.132 An informa-
tion letter may be issued when the nature of the request from the
individual or the organization suggests that it is seeking general
information, or when the request does not meet all the require-
129. See generally Rev. Proc. 2008-6, supra note 128.
130. IRS DATA BOOK 2007, tbl.3, available at http://www.irs.gov/pub/irs-soi/07db23dl.xls.
131. Rev. Proc. 2008-4, § 13.05, 2008-1 I.R.B. 121, 149.
132. Rev. Proc. 2008-1, supra note 84, § 2.04.
Spring 2008 The Four R’s Revisited 353
ments of a request for ruling or for a determination letter.133 Its
primary purpose is to impart general information which the Ser-
vice feels will assist the individual or the organization making
such request.134
The Service is not bound by any statements contained in infor-
mation letters, since these letters are not rulings. A taxpayer who
relies on written erroneous advice from the Service, however, may
have any penalties or interest attributable to such reliance
abated.135
V. LEGAL ADVICE PROGRAM
While the Service issues published guidance in order to provide
assistance to taxpayers, it releases to the public certain legal ad-
vice prepared by the Office of Chief Counsel because it is required
to do so by the Code and other federal law, most notably the Free-
dom of Information Act. Regulations and other published guid-
ance represent the culmination of substantial time, effort, and
thought of the legal staff of the Office of Chief Counsel and the
Treasury Department, principally the Office of the Assistant Sec-
retary for Tax Policy. Yet no matter how precise, exhaustive, or
carefully thought-through regulations, revenue rulings, and other
published guidance may be, their authors can never hope to ad-
dress every conceivable issue or situation to which the guidance
might apply. There will invariably be issues and fact patterns
confronting Service personnel and Chief Counsel attorneys that
are not resolved definitively by existing law or published guidance.
Many of these cases will be confined to a particular taxpayer or
group of similarly-situated taxpayers and involve a relatively nar-
row issue.
To meet the needs of these taxpayers, the Office of Chief Coun-
sel provides legal advice both orally and in writing to Chief Coun-
sel field personnel, as well as to Service employees in the national
office and in the field. Over the years, the form and the name
given to this advice have varied. However denominated, all legal
advice provided by the Office of Chief Counsel is intended to assist
Service employees to properly administer and enforce the internal
revenue laws and related statutes. It is the most fundamental
function of any government or private legal office to provide advice
133. Id.
134. Id.
135. I.R.C. § 6404(f) (2000).
354 Duquesne Law Review Vol. 46
concerning the application of the law to a given situation and to
recommend a course of action. Unlike published guidance—and to
a lesser extent letter rulings—legal advice is not intended to be a
policy pronouncement, instruction, or advisement to taxpayers,
tax practitioners, or the general public. For this reason, the Ser-
vice cautions its own employees against applying legal advice be-
yond the situation to which the advice pertains and the taxpayer
or class of taxpayers as to whom it is issued.136
The Office of Chief Counsel makes much of its formal legal ad-
vice available to the public, after first redacting privacy-protected
and privileged material. Despite the limited applicability of legal
advice, much of it is publicly accessible, so there may be a strong
temptation to consider the advice as determinative in similar
situations or to use it to support a desired position. However, tax-
payers cannot and should not rely upon this legal advice in plan-
ning transactions or taking positions, and, to the extent taxpayers
and their advisors base their decisions on legal advice issued by
the Office of Chief Counsel, they do so at their own risk.137
Technical Advice Memoranda
Definition
The most authoritative form of legal advice, and the only one for
which the Service publishes an annual revenue procedure,138 is the
Technical Advice Memorandum, or TAM. A TAM is legal advice
from one of the Associate Chief Counsel Offices to a Division
Commissioner of an operating division139 or an Appeals Area Di-
rector.140 A TAM responds to a request for assistance on a techni-
cal or procedural question that arises during any proceeding be-
fore the Service.141 The request for advice must concern the inter-
pretation and application of the internal revenue laws, tax trea-
ties, regulations, revenue rulings, or other precedents to a specific
set of facts to determine the correct tax treatment for an item in a
year under audit or on appeal.142 Service personnel assigned to
136. See, e.g., C.C.D.M., supra note 4, 33.1.2.2.3.4(1), 33.1.2.2.3.5 (Aug. 11, 2004).
137. See I.R.C. § 6110(k)(3), which provides that a written determination may not be
used or cited as precedent.
138. See Rev. Proc. 2008-2, 2008-1 I.R.B. 90.
139. These operating divisions are Large and Mid-Size Business, Small Business/Self-
Employed, Wage and Investment, and Tax Exempt and Government Entities.
140. Rev. Proc. 2008-2, supra note 138, §§ 1.01, 2.01, 2.02, 3.01.
141. Id. § 3.01.
142. Id.
Spring 2008 The Four R’s Revisited 355
the examination of cases may seek a TAM, or a taxpayer may re-
quest that an issue be referred for technical advice.143
A TAM has certain characteristics in common with a letter rul-
ing. For example, before a field director submits a request for
technical advice, a pre-submission conference is held with the field
office, field counsel, the Associate Chief Counsel Office, and the
taxpayer (and any representative of the taxpayer) to define the
scope of the request and to determine the factual information and
documentation that should accompany the request.144 Also, simi-
lar to letter rulings, if an Associate Chief Counsel Office proposes
to issue a TAM adverse to the taxpayer, the taxpayer has the right
to a conference with the Associate Chief Counsel office.145 Only a
director, however, may withdraw a technical advice request.146
Reliance and Revocation
Technical Advice Memoranda are open to public inspection.147
They are redacted to remove any identifying information of the
particular taxpayer involved and other exempt information.148
Although TAMs are available to the public, other taxpayers may
not rely on TAMs as precedent that governs the outcome of their
cases.149 A conclusion in a TAM is exclusive to the case for which
it was requested.150 That said, TAMs issued after October 31,
143. Id. § 5.02.
144. Id. §§ 6.01, 6.02.
145. Rev. Proc. 2008-2, supra note 138, § 9.01.
146. Id. § 11.01.
147. Section 6110(a) of the Internal Revenue Code provides that any “written determi-
nation” and any “background file document” relating to the written determination shall be
open to the public. Technical Advice Memoranda are included in the definition of a “writ-
ten determination” in section 6110(b). A background file document is basically any back-
ground materials, such as the request for the TAM or other written determination and
supporting records. I.R.C. § 6110(b)(2) (2000).
148. Section 6110(c) lists seven exemptions, which cover obvious types of sensitive in-
formation, such as information that would identify the taxpayer, and some that may be less
obvious, such as geological and geophysical information. I.R.C. §§ 6110 (c)(1), (7) (2000).
Once a TAM is issued, the Service notifies the taxpayer that the TAM will be publicly dis-
closed with the taxpayer’s identifying information removed. Id. § 6110(f); Treas. Reg.
§ 301.6110-5(a) (2001). The taxpayer may submit a written statement to the Service pro-
testing the proposed disclosure of information in a TAM, and if the taxpayer is unsatisfied
with the final administrative determination as to what will be disclosed, the taxpayer may
file a petition with the Tax Court challenging the extent of the intended disclosure. I.R.C.
§ 6110(f)(2)-(3) (2000); Treas. Reg. § 301.6110-5(b) (2001).
149. I.R.C. § 6110(k)(3); Rev. Proc. 2008-2, supra note 138, § 13.04; C.C.D.M., supra note
4, 31.1.1.1.1(3) (Aug. 11, 2004).
150. Rev. Proc. 2008-2, supra note 138, § 12 (“After a TAM is issued, the director must
process the taxpayer’s case on the basis of the conclusions in the TAM.”). As to the tax-
payer concerned (but not a different taxpayer), a TAM is usually retroactive, and it is also
356 Duquesne Law Review Vol. 46
1976, are authority in determining whether there is substantial
authority for the tax treatment of an item as a defense to the sec-
tion 6662 accuracy-related penalty.151
Chief Counsel Notices
Chief Counsel notices are internal directives of the Office of
Chief Counsel that provide interim guidance, temporary proce-
dures, changes in litigating positions, personnel announcements,
or other administrative updates.152 Chief Counsel notices are the
most effective way to convey important developments and changes
to all Counsel personnel. The contents of notices that furnish in-
terim guidance or instructions to staff are eventually incorporated
into the Chief Counsel Directives Manual, but the notices serve as
immediate notification. Chief Counsel notices that have not yet
been incorporated into the Chief Counsel Directives Manual or are
otherwise active, are available to the public on the Service’s web-
site.153 Taxpayers may not rely on Chief Counsel notices as au-
thority on any issue.
Chief Counsel Advice
Historically, Chief Counsel attorneys in certain offices in the na-
tional office issued legal advice to Chief Counsel field offices. Af-
ter the filing of Tax Analysts v. Internal Revenue Service,154 this
advice became known as Field Service Advice.155 Field Service
Advice was case-specific written advice from one of these offices156
prospective if it relates to a continuing action or series of actions. Id. § 13.03. TAMs apply
to ongoing matters until withdrawn or until the conclusion is modified or revoked by a
court decision, statute, treaty, regulation, or other published guidance. Id.
151. Treas. Reg. § 1.6662-4(d)(3)(iii) (2003).
152. C.C.D.M., supra note 4, 30.2.1.4(1) (Aug. 18, 2006). Chief Counsel Notices should
not be confused with Notices published in the Internal Revenue Bulletin. See discussion
supra at p. 338.
153. The Service makes Chief Counsel Notices and other work products written by the
Office of Chief Counsel available in the Service’s Electronic Reading Room. See
http://www.irs.gov/foia/article/0,,id=110353,00.html.
154. Tax Analysts v. Internal Revenue Serv., No. Civ. A. 94-923 (GK), 1996 WL 134587
(D.D.C. Mar. 15, 1996), remanded for further consideration, 117 F.3d 607 (D.C. Cir. 1997).
155. H.R. REP. NO. 105-599, at 298 (1998) (Conf. Rep.), reprinted in 1998 U.S.C.C.A.N.
Field Service Advice was the name given to legal advice that had been issued prior to a
reorganization of the Office of Chief Counsel by the Tax Litigation Division, an office that
was then responsible for providing advice in tax litigation cases to field offices litigating
cases.
156. These offices were the Associate Chief Counsel (Employee Benefits and Exempt
Organizations), the Associate Chief Counsel (International), and the Field Service Division
of the Associate Chief Counsel (Domestic). At one time, these offices also provided similar
Spring 2008 The Four R’s Revisited 357
to the field in both court-docketed cases and cases not yet filed in
court.157 Field Service Advice was neither a final determination of
the Service nor an official position of the Office of Chief Counsel,
even with regard to the case in which the advice was requested.158
After the United States District Court for the District of Colum-
bia determined that Field Service Advice was subject to release
under the Freedom of Information Act,159 Congress amended sec-
tion 6110 in 1998 to define certain legal advice as Chief Counsel
Advice that must be released for public inspection. 160 This
amendment to the statute provided a mechanism for taxpayers to
participate in the process of redacting their identifying informa-
tion from the advice, similar to that provided for TAMs and letter
rulings, which was not required if the advice had been released
under the FOIA.
Section 6110 defines Chief Counsel Advice as “written advice or
instruction, under whatever name or designation, prepared by any
national office component of the Office of Chief Counsel” that is
issued to Service or Chief Counsel personnel in the field interpret-
ing or concerning a “revenue provision.”161 Unlike TAMs, Chief
Counsel Advice may provide advice relating to specific taxpayers
or it may provide advice relating to a class of taxpayers or certain
legal advice to the field in the form of Service Center Advice, which was made public. As
the name suggests, Service Center Advice was legal advice to Service Centers and related
to functions regarding their tax administration responsibilities. C.C.D.M., supra note 4,
(35)2(13)1(1) (Sept. 29, 1997) (no longer in effect). After the changes to I.R.C. § 6110, Ser-
vice Center Advice was subsumed with the definition of Chief Counsel Advice. I.R.S. Chief
Couns. Notice N(35)000-143a (Feb. 16, 1999).
157. C.C.D.M., supra note 4, (35)3(19)3(4) (Jan. 6, 1997) (no longer in effect); id.
(35)274(2)(b) (July 24, 1996) (no longer in effect).
158. Id. (35)274(2)(b)3 (July 24, 1996) (no longer in effect).
159. Tax Analysts v. Internal Revenue Serv., 1996 WL 134587, at *1.
160. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-
206, § 3509, 112 Stat. 685, 772-74 (codified at I.R.C. § 6110(i) (2000)); H.R. REP. NO. 105-
599, at 298-99 (1998) (Conf. Rep.), reprinted in 1998 U.S.C.C.A.N. The Act also added
Chief Counsel Advice to the definition of a “written determination” in I.R.C. § 6110(b). By
including Chief Counsel Advice within the disclosure framework of I.R.C. § 6110, see I.R.C.
§ 6110(b)(1)(A) (2000), Congress intended to remove the advice from disclosure under the
Freedom of Information Act, 5 U.S.C. § 552 (2000 & Supp. V 2005). See I.R.C. § 6110(m)
(2000) (providing that “written determinations” are not subject to mandatory disclosure);
H.R. REP. NO. 105-599, at 302 (1998) (Conf. Rep.), reprinted in 1998 U.S.C.C.A.N.
161. I.R.C. § 6110(i)(1) (2000). A “revenue provision” means not only a current or prior
provision of the Code, but a tax treaty, regulation, revenue ruling, revenue procedure, or
“other published or unpublished guidance.” Id. § 6110(i)(1)(B). Chief Counsel Advice also
includes “any Internal Revenue Service or Office of Chief Counsel position or policy con-
cerning a revenue provision” and “any legal interpretation of State law, foreign law, or
other Federal law relating to the assessment or collection of any liability under a revenue
provision.” Id. § 6110(i)(A)(ii).
358 Duquesne Law Review Vol. 46
fact patterns.162 Similar to section 6110 written determinations,
Chief Counsel Advice is open to the public, subject to the removal
of identifying information of the taxpayer’s and any third party’s
information exempt under the FOIA.163 For Chief Counsel Advice
that relates to a specific taxpayer, that taxpayer has the rights to
notification of what will be publicly disclosed and to pursue addi-
tional redactions.164 Chief Counsel Advice is used in developing,
settling, or otherwise resolving the case or cases for which the ad-
vice is requested.165 Chief Counsel Advice may not be used or
cited as precedent.166
While these documents may provide some insight into how the
Office of Chief Counsel analyzes issues, any advice they contain
must be viewed cautiously by taxpayers and their advisers. These
forms of legal advice are written by docket attorneys within the
Associate Chief Counsel Offices and are usually reviewed by a
first line manager, such as a senior technician reviewer or a
branch chief. As there is no assurance that the Service will apply
the result in any given Chief Counsel Advice to matters other than
those explicitly covered in the document, taxpayers and their ad-
visers cannot rely on these documents in determining how to con-
summate transactions or take return positions.
Program Manager Advice
One of the most vital purposes of legal advice is to facilitate the
Service’s management of its myriad programs consistent with the
law. The Office of Chief Counsel routinely provides advice to
those Service officials who manage national programs for the Ser-
vice.167 Division Counsel are currently responsible for providing
routine legal advice to these program managers. Program manag-
ers may also seek program advice from the Associate Chief Coun-
sel Offices, such as when the advice principally concerns the in-
terpretation of provisions of the Code or when program managers
162. C.C.D.M., supra note 4, 33.1.3.1.1(2) (Aug. 11, 2004).
163. I.R.C. §§ 6110(a), (c)(1), (c)(3), (i)(3)(B) (2000); Treas. Reg. § 301.6110-1(a) (1977).
FOIA Exemption 3, 5 U.S.C. § 552(b)(3) (2000), however, which incorporates the exemption
provisions of other federal statutes, does not apply in conjunction with I.R.C. § 6103 or any
other section of title 26. I.R.C. § 6110(i)(3)(B) (2000).
164. I.R.C. § 6110(i)(4) (2000).
165. C.C.D.M., supra note 4, 33.1.2.2.3.5 (Aug. 11, 2004).
166. I.R.C. § 6110(k)(3) (2000); Treas. Reg. § 301.6110-7(b) (1977).
167. The most obvious examples are the Commissioners for the Service’s Operating
Divisions. Others include operational directors and the directors of industry-wide pro-
grams.
Spring 2008 The Four R’s Revisited 359
must apply newly enacted legislation,168 which will eventually be
released to the public under the name Program Manager Techni-
cal Assistance.
Program manager advice is generally directed at resolving is-
sues at a systemic level. This type of advice is an outgrowth of a
type of advice called Technical Assistance, since it was historically
provided by tax law specialists working for the Service’s Assistant
Commissioner (Technical). Technical Assistance was traditionally
legal advice provided on technical issues mostly outside the con-
text of a taxpayer’s case, though a certain amount of the assis-
tance was devoted to specific cases.169 Some of this type of advice
provides assistance to the Service principally in the nature of
comment on the content of tax forms and tax publications, the In-
ternal Revenue Manual, or pending legislation.170 Other technical
assistance consists of memoranda issued to program managers
that reflect the considered legal conclusions of the Office of Chief
Counsel that the Service must make open to public inspection.171
Like Chief Counsel Advice, Program Manager Advice may pro-
vide some insight into how the Office of Chief Counsel analyzes
issues, but it has the same inherent limitations. As a result, any
legal advice they contain must be viewed cautiously by taxpayers
and their advisers.
Associate Memoranda
In 2005, I asked an internal Chief Counsel Task Force to con-
sider improvements in the way field counsel and the Associate
Chief Counsel Offices work together in the legal advice process.
One of the concerns addressed by the Task Force was revenue
agents’ overly broad reliance on the conclusions in TAMs to re-
solve industry wide issues.172 Based on the task force’s recom-
mendation, new procedures were implemented to provide legal
168. C.C.D.M., supra note 4, 33.1.2.2.4(2) (Aug. 11, 2004).
169. Id. (35)274(2)(c) (July 24, 1996) (no longer in effect). Technical Assistance is not
synonymous with Technical Advice Memoranda or TAMs discussed supra at page 355.
170. See Tax Analysts v. Internal Revenue Serv., 97 F. Supp. 2d 13, 15 (D.D.C. 2000),
aff’d in part and rev’d in part, 294 F.3d 71 (D.C. Cir. 2002), reh’g denied, 2002 U.S. App.
LEXIS 15956 (D.C. Cir. Aug. 5, 2002), motion granted in part, and motion denied in part,
483 F. Supp. 2d 8 (D.D.C. 2007). As this kind of advice is protected by the deliberative
process privilege, it is not released to the public.
171. Tax Analysts v. Internal Revenue Serv., 152 F. Supp. 2d 1, 20-24 (D.D.C. 2001),
aff’d in part and rev’d in part, 294 F.3d 71 (D.C. Cir. 2002); Tax Analysts v. Internal Reve-
nue Serv., 483 F. Supp. 2d 8 (D.D.C. 2007). This advice may include general legal advice on
program or it may also include advice sought with respect to particular taxpayers’ cases.
172. I.R.S. Chief Couns. Notice CC-2006-013 (May 5, 2006).
360 Duquesne Law Review Vol. 46
advice, referred to as Associate Memoranda, that could be applied
by revenue agents to resolve these types of issues.173 Unlike most
Chief Counsel Advice, this type of legal advice must be issued by
an Associate Chief Counsel executive and is provided to program
managers in the Service and Division Counsel executives.
An Associate Memorandum is written so that it can be released
in its entirety to the public, but it is not intended to state Service
position. Since it is reviewed at higher levels and issued by an
executive who has responsibility for providing legal advice on the
issue, the legal advice it states is more reliable than that con-
tained in Chief Counsel Advice. Nonetheless, the Service is not
bound to resolve cases in accordance with a position stated in an
Associate Memorandum, and taxpayers, therefore, cannot assume
that transactions conforming to that advice will not be challenged
by the Service.
Field Legal Advice
Field counsel are oftentimes the first point of contact with the
Office of Chief Counsel for litigation matters and for Service per-
sonnel. Besides representing the Service in Tax Court and in
bankruptcy court, attorneys in the Associate Area Counsel offices
regularly provide legal advice to Service employees and managers.
Field attorneys have always served as the first—and often the
last—source for routine, and sometimes non-routine, legal advice
to their local clients.174 Area Directors and their staffs, Appeals
Officers, and the campuses rely on that advice to carry out day-to-
day operations.
Field legal advice can be delivered orally or by email when a
quick answer is needed, but is also frequently provided in a
memorandum.175 Depending on the case or the significance of the
issue, it may be necessary for field attorneys to coordinate advice
with the headquarters office of Division Counsel or an Associate
Chief Counsel Office.176 In some of these situations, field attor-
neys prepare a memorandum and seek the concurrence of the ap-
173. Id.; see also I.R.S. Chief Couns. Notice CC-2007-003 (Jan. 17, 2007).
174. C.C.D.M., supra note 4, 33.1.2.2.1(1) (Aug. 11, 2004), 35(271)(1), 35(272)(1),
35(273)(1) (Apr. 8, 1992).
175. Id. 33.1.2.2.1(1) (Aug. 11, 2004).
176. Examples of matters that must be coordinated between the field and the Associate
Chief Counsel Offices are matters involving the validity of a regulation, revenue ruling, or
revenue procedure; a corporate tax shelter that is a listed transaction; and matters involv-
ing taxpayers who are local or state governments. For other examples, see id. 31.1.1-1
(Aug. 11, 2004).
Spring 2008 The Four R’s Revisited 361
propriate Associate Chief Counsel office.177 The reviewer’s com-
ments may be provided orally or may consist of pen and ink
changes to the memorandum.178 Although not Chief Counsel Ad-
vice, written field advice issued after this kind of review is never-
theless processed and disclosed under procedures similar to those
for Chief Counsel Advice.179
Litigation Guideline Memoranda
Chief Counsel notices announce, among other things, changes in
litigating positions and provide procedures for litigating certain
issues or types of cases. The same sort of advice was previously
provided in the form of Litigation Guideline Memoranda. These
memoranda dispense information and instructions on litigating
procedures and methods.180 Litigation Guideline Memoranda ad-
ditionally set forth standards and criteria on issues and topics of
special interest to Chief Counsel attorneys who do litigation.181
As legal advice issued by the national office to the field, Litiga-
tion Guideline Memoranda now fall under the definition of Chief
Counsel Advice.182 Litigation Guideline Memoranda were drafted
as guides to help field counsel with litigation and are usable as a
research tool, but the memoranda have limited utility due to their
age. Taxpayers and tax practitioners may find these documents of
historical interest, but should consider them in the same manner
as Chief Counsel Advice in terms of reliance, understanding that
they are unlikely to predict the positions the Service will take in
litigation.
177. Id. 33.1.2.3 (Aug. 11, 2004). The advice is normally reviewed before it is issued,
with post-issuance review only in unusual circumstances. Id. ¶ 1.
178. Id. 33.1.2.3.2(2); I.R.S. Chief Couns. Notice CC-2005-003 (Dec. 12, 2002).
179. C.C.D.M., supra note 4, 33.1.2.3.1, 33.1.2.3.2(5) (Aug. 11, 2004). This advice is
released under the name Legal Advice Issued by Field Attorneys and is available in the
Service’s Electronic Reading Room. See supra note 153.
180. I.R.S. Chief Couns. Notice N(32)210-1 (Apr. 18, 1988).
181. Id.
182. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No.
105-206, § 3509(d)(2)(A), 112 Stat. 774 (1998) (transition rule mentioning Litigation Guide-
line Memoranda among post-December 31, 1985 Chief Counsel Advice required to be pub-
licly disclosed). See also I.R.S. Announcement 99-81, 1999-2 C.B. 244 (announcing that
Litigation Guideline Memoranda issued beginning January 1, 1986 have been made pub-
licly available). Although pre-1986 Litigation Guideline Memoranda were for a time the
subject of FOIA litigation, they have likewise been made publicly available. Tax Analysts,
152 F. Supp. 2d at 4. These documents are available in the Electronic Reading Room on
the Service website. See supra note 153.
362 Duquesne Law Review Vol. 46
Other Legal Advice
Each type of legal advice that has been discussed so far not only
has a long pedigree but is in active, current use, which presuma-
bly will continue as long as these products meet the needs of the
Office of Chief Counsel and Service personnel for legal advice.183
There are a few other forms of legal advice that have been re-
leased to the public in the past but are no longer being issued.
One now all-but-extinct form of advice was the General Counsel
Memorandum (GCM). These memoranda were formal legal opin-
ions by Chief Counsel components of the national office on sub-
stantive and procedural issues.184 Nearly 40,000 GCMs were au-
thored over several decades.185 Beginning with the first GCM in
1926, the opinions were written to address a specific issue or is-
sues and were numbered and indexed for research and retrieval
purposes.186 From 1926 to 1953, the Service published selected
GCMs in the Internal Revenue Bulletin.187 Beginning in 1981,
GCMs were made available to the public under the FOIA.188
Almost as old and voluminous as GCMs are Office Memoranda.
Between 1928 and 1991, over 20,000 OMs were issued. The na-
tional office issued OMs as formal legal advice to litigation units
on questions of “major significance” resulting from tax litiga-
tion.189 In 2003, OMs were all declared obsolete, but like GCMs,
they were indexed and retained for their research and historical
value,190 and are releasable under the FOIA.
Finally, several Chief Counsel offices formerly put out bulletins
apprising Counsel and Service employees of developments in the
law. The Tax Litigation Bulletins, for example, were mostly
summaries of decided and pending tax cases. General Litigation
183. Irrespective of name changes, the functions of the different forms of advice have
remained essentially the same.
184. C.C.D.M., supra note 4, 30.7.2.2(1) (Mar. 26, 1985) (no longer in effect).
185. Recent GCMs have been issued only to revoke earlier GCMs and do not provide
legal advice.
186. C.C.D.M., supra note 4, (39)(10)10(1) (Dec. 2, 1992) (no longer in effect).
187. Taxation with Representation Fund v. Internal Revenue Serv., 646 F.2d 666, 671
(D.C. Cir. 1981).
188. Taxation with Representation, 646 F.2d at 671. In Taxation with Representation,
the court held that GCMs reflecting the final position of the Service and distributed as such
were not exempt from disclosure by Exemption 5 and the deliberative process privilege
because they functioned as a body of “working law” within the Service. In contrast, GCMs
that were not adopted, indexed, and distributed throughout the agency were exempt be-
cause they were remained subject to the deliberative process privilege and exemption 5. Id.
at 681-83.
189. C.C.D.M., supra note 4, (39)873(1) (Dec. 2, 1992) (no longer in effect).
190. I.R.S. Chief Couns. Notice CC-2003-005 (Jan. 16, 2003).
Spring 2008 The Four R’s Revisited 363
Bulletins (and the successor Collection, Bankruptcy & Summonses
Bulletins) summarized court opinions concerning topics such as
bankruptcy and collection. Criminal Tax Bulletins did the same
for criminal tax cases, and the Disclosure Litigation Bulletins spe-
cialized in privacy and disclosure of information. As the legisla-
tive history of section 6110 made clear, all of these bulletins are
Chief Counsel Advice.191
VI. ACQUIESCENCE PROGRAM
Acquiescence and Actions on Decision
A notice of acquiescence is an announcement by the Service in-
dicating whether it will follow a significant adverse decision.192
An Action on Decision (AOD) is an internal document prepared
within the Chief Counsel’s Office reflecting the judgment of what
announcement should be made. It is the policy of the Service to
announce at an early date whether it will follow the holdings in
cases193 that involve significant issues decided adversely to the
Government.194
In these kinds of cases, an AOD is issued. For this purpose, the
“issue” is the basis upon which the court determined the tax liabil-
ity of the taxpayer.195 Issues are decided adversely to the Gov-
ernment when the Service is adversely affected in its legal posi-
tion by the opinion. An issue may be considered adverse for the
purpose of determining whether an AOD should be issued, even if
neither the case nor the issue is appealable.196 Other factors
taken into consideration when deciding whether to issue an AOD
include: (1) whether the opinion involves an issue under the in-
dustry resolution program; (2) the number of cases and amount of
revenue affected by the opinion; (3) the impact of the opinion on
regulations, revenue rulings, revenue procedures, and other tech-
nical pronouncements; (4) whether the opinion is inconsistent with
legislative history or opinions in other courts; (5) whether the is-
sue has been lost by the Government in two or more circuits; (6)
191. H.R. REP. NO. 105-599, at 298 (1998)(Conf. Rep.), reprinted in 1998 U.S.C.C.A.N.
These documents are available in the Electronic Reading Room on the Service website. See
supra note 153.
192. I.R.M., supra note 27, 4.10.7.2.9.8.1(1) (Jan. 1, 2006); C.C.D.M., supra note 4,
36.3.1.1 (Aug. 11, 2004).
193. I.R.M., supra note 27, 4.10.7.2.9.8.1(1) (Jan. 1, 2006).
194. C.C.D.M., supra note 4, 36.3.1.2 (Aug. 11, 2004).
195. Id. 36.3.1.2(2).
196. Id. 36.3.1.2.
364 Duquesne Law Review Vol. 46
whether the case is of first impression; (7) the likelihood of a fu-
ture split in the circuits; (8) whether en banc review in the circuit
is sought; (9) whether the opinion may be limited to its facts; (10)
whether the opinion places an onerous administrative burden on
the Service or taxpayers; and (11) whether the opinion is based on
Code sections, regulations, or rulings that have been modified or
revoked.197
History
The present Service policy of issuing acquiescences in Tax Court
opinions is, in large part, an historical accident. The Revenue Act
of 1924198 provided that the Commissioner had one year to appeal
from an adverse decision of the Board of Tax Appeals. A taxpayer
receiving a favorable opinion from the Board of Tax Appeals was
not at all sure of the finality of the opinion until the appeal period
had run. To aid the petitioner, the Service began to issue acquies-
cences and nonacquiescences in the Board of Tax Appeal cases.
When the Service acquiesced, it simply meant the Commissioner
had determined not to appeal the case. When the Commissioner
issued a nonacquiescence, this signaled his intention to appeal.
Two years later, the statute was amended to allow for appeals di-
rectly to the Court of Appeals; previously, appeals lay in the Dis-
trict Court and the appeal time was shortened to six months.199 In
1932, the present rule of three months as the time for appeal was
instituted,200 and the acquiescence procedure was no longer neces-
sary to alert the petitioner of the Commissioner’s plan to appeal.
But, by that time, another and far more significant use for the
acquiescence procedure had developed, so the Service did not dis-
continue its use. In the 1925 Cumulative Bulletin, the Service
first announced the meaning of the acquiescence procedure.201
Among other things, it stated that the decisions acquiesced in
should be relied upon by Service employees as precedents in the
disposition of other cases before the Bureau.202 Tax practitioners,
as well as the Service, found this procedure helpful when transac-
tions were questioned by agents on audit. The questioned trans-
action could easily be disposed of if an acquiesced case having
197. Id.
198. Revenue Act of 1924, ch. 234, § 274(b), 43 Stat. 297 (1924).
199. Revenue Act of 1926, ch. 27, § 1001, 44 Stat. 109 (1926).
200. Revenue Act of 1932, ch. 209, § 1101(a), 47 Stat. 286 (1932).
201. IV-1 C.B. iv (1925).
202. Id.
Spring 2008 The Four R’s Revisited 365
similar facts could be found. Both the agent and the taxpayer un-
derstood from the acquiescence that the present position of the
Service was not to litigate this same issue again.
Today, the acquiescence program has expanded beyond the
original purpose of indicating the Service’s litigating position fol-
lowing an adverse decision of the Tax Court. The Service’s acqui-
escence program now includes all civil tax cases in which guidance
is determined to be helpful.203 As a consequence, announcements
of acquiescence or nonacquiescence issue are written for the hold-
ings of memorandum Tax Court opinions, as well as decisions
from the U.S. District Courts, Claims Court, and Circuit Courts of
Appeal.204 Announcements of acquiescence and nonacquiescence
are published weekly in the Internal Revenue Bulletin and con-
solidated periodically in the Cumulative Bulletin. They are suc-
cinct statements of the Service’s formal position in a given case.
The somewhat lengthier memorandum on which the notice is
based—the AOD prepared within Chief Counsel’s Office—is not
published in the Internal Revenue Bulletin or Cumulative Bulle-
tin, but it is released to the public.205
Need for Acquiescence Program
The acquiescence program continues as a helpful tool to both
the revenue agents and the taxpayers in settling controversies
over completed transactions. With respect to prospective transac-
tions, acquiescence or nonacquiescence can serve as a guide to
taxpayers.206 When a taxpayer’s transaction parallels that of a
transaction in an acquiesced case, absent other considerations, the
taxpayer can reasonably expect that a favorable ruling could be
obtained from the Service.207 Thus, the acquiescence program
serves both the Service and the public by keeping them informed
of the Commissioner’s current litigating position. When viewed in
203. C.C.D.M., supra note 4, 39.11.5.1(1) (Oct. 20, 1987).
204. I.R.M., supra note 27, 4.10.7.2.9.8.1(3) (Jan. 1, 2006).
205. Disclosure of the AOD memoranda on which notices of acquiescence or nonacquies-
cence are based was the subject of litigation that resulted in the disclosure of these docu-
ments. See Taxation with Representation Fund v. Internal Revenue Serv., 485 F. Supp.
263 (D.D.C. 1980), aff’d, 646 F.2d 666 (D.C. Cir. 1981) (finding AODs not generally ex-
empted from mandatory disclosure by the deliberative process privilege of 5 U.S.C. §
552(b)(5)). These documents are available in the Electronic Reading Room on the Service
website. See supra note 153.
206. The internal AOD is intended to provide controlling guidance for Service personnel
working similar issues in other cases. See, e.g., 2007-6 I.R.B. 419, at n.1.
207. E.g., 1964-1 C.B. 3.
366 Duquesne Law Review Vol. 46
this light, it becomes apparent that this program is an additional
aid to taxpayers provided by the Service in an effort to acquaint
taxpayers with the Commissioner’s present view of the law.
There are only three possible statements of position in an an-
nouncement of acquiescence or nonacquiescence: namely, acquies-
cence, acquiescence in result only, or nonacquiescence.208 Acquies-
cence indicates that the Service accepts the holding of the court in
a case and will follow the holding in disposing of cases with the
same controlling facts.209 Acquiescence does not indicate either
“approval [or] disapproval of the reasons assigned by the court for
its conclusions.”210 Acquiescence in result only likewise indicates
“that the Service accepts the holding of the court in a case and . . .
will follow [the holding] in disposing of cases with the same con-
trolling facts.”211 Acquiescence in result only telegraphs Service
disagreement or concern with some or all of the reasons given by
the deciding court for the holding in the case.212 Finally,
[n]onacquiescence signifies that, although no further review
was sought, the Service does not agree with the holding of the
court and generally, will not follow the decision in disposing of
cases involving other taxpayers. In reference to an opinion of
a circuit court of appeals, a nonacquiescence indicates that
the Service will not follow the holding on a nationwide basis.
[In general], the Service will recognize the precedential im-
pact of the opinion on cases arising within the venue of the
deciding circuit.213
AODs and subsequent announcements generally do not affect
the application of stare decisis or the rule of precedent. The Ser-
vice will recognize these principles and generally concede issues
accordingly during administrative proceedings. Furthermore, the
Service generally adheres to the controlling precedent of a given
circuit when litigating a case bound by that circuit’s precedent,
per Golsen v. Commissioner.214 Nevertheless, in very rare circum-
stances, nonacquiescence to a circuit court case will not necessar-
ily imply an intention on the part of the Service to comply with the
208. I.R.M., supra note 27, 4.10.7.2.9.8.1(4) (Jan. 1, 2006).
209. Id.
210. Id. 4.10.7.2.9.8.1(4)(A).
211. Id. 4.10.7.2.9.8.1(4).
212. Id. 4.10.7.2.9.8.1(4)(B).
213. I.R.M., supra note 27, 4.10.7.2.9.8.1(4)(C) (Jan. 1, 2006).
214. 54 T.C. 742, 756-57 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971). See C.C.D.M.,
supra note 4, 36.3.1.4(2)(c)-(3) (Aug. 11, 2004).
Spring 2008 The Four R’s Revisited 367
precedent within the same circuit issuing the opinion. This may
occur if the Service intends to continue to litigate the matter in
the deciding circuit or if the case does not establish controlling
circuit court precedent because the holding can be limited to its
unique facts.215 In such cases, the AOD will provide explicit guid-
ance concerning how to handle the matter within the issuing cir-
cuit.216
Reliance and Revocation
The Commissioner has complete power to modify, amend, or re-
voke his acquiescences and to make such changes retroactive as to
all taxpayers or, in the exercise of his discretion, certain classes of
taxpayers.217 He may also exercise his discretion to make any
modification prospective.218
It is important to carefully delineate the extent to which acqui-
escences and nonacquiescences can be relied upon by the taxpayer
and by the Service. Difficulties between the taxpayer and the
Service most often arise in the acquiescence program when the
taxpayer attempts to use an acquiescence for a purpose for which
it was not intended. Dixon v. United States 219 is a prime example
of this. In this case, the taxpayers contended they were entitled to
receive capital gains treatment as to a transaction involving origi-
nal issue discount because they entered into the transaction in
reliance upon the Commissioner’s acquiescence in Caulkins v.
Commissioner.220 Although the acquiescence was eventually with-
drawn, this action did not take place until after the taxpayers had
completed their transaction.221 The Supreme Court, in upholding
the Commissioner, noted the Service had carefully delineated the
scope of acquiescences and nonacquiescences in the Internal
Revenue Bulletins, both in the preface to the bulletin and in the
introduction to the announcement on acquiescences.222 Taxpayers
were clearly advised that caution should be exercised in relying
upon acquiescences in planning transactions, and that revocation
215. C.C.D.M., supra note 4, 36.3.1.4(3)-(4) (Aug. 11, 2004).
216. Id.
217. Dixon v. United States, 381 U.S. 68, 72-73 (1965).
218. I.R.C. § 7805(b) (2000).
219. 381 U.S. 68 (1965).
220. 1 T.C. 656 (1943), acq., 1944 C.B. 5, nonacq., 1955-2 C.B. 3, aff’d, 144 F.2d 482 (6th
Cir. 1944).
221. The change of position was expanded upon in a revenue ruling. Rev. Rul. 55-136,
1955-1 C.B. 213.
222. Dixon, 381 U.S. at 73-74 & n.6.
368 Duquesne Law Review Vol. 46
of an acquiescence was generally retroactive.223 This may be con-
trasted with the administrative treatment given to revocations of
regulations or revenue rulings.
Because taxpayers are repeatedly warned that acquiescences
are not to be relied upon in planning transactions, the Commis-
sioner has rarely exercised his discretion to make a change in po-
sition prospective only.224 In general, it may be said that such dis-
cretion will be exercised when the acquiescence to be revoked was
one of broad, general, and long-standing application, which had
been consistently relied upon by Service officials in issuing private
rulings or determination letters. An example of this situation is
the Commissioner’s change in position in Minnesota Mortuaries,
Inc. v. Commissioner,225 a case dealing with the characterization of
income for personal holding company purposes. In 1945, the Ser-
vice acquiesced and followed the case both in rulings and on au-
dit.226 In 1965, the acquiescence was withdrawn and a nonacqui-
escence substituted.227 The Commissioner, after weighing these
factors and considering the hardship involved in applying this
nonacquiescence retroactively, exercised his discretion by making
its application prospective.228 The fact that many people may be
involved or that hardship will ensue if the revocation of an acqui-
escence is made retroactive does not, however, automatically en-
sure that the Commissioner will exercise his discretion. It is only
in unusual circumstances that a revocation of an acquiescence will
be prospective only.
The Service’s acquiescence program was neither designed nor
intended to be relied upon by taxpayers in planning transac-
tions.229 Reliance in planning situations is the function of the
regulation and ruling programs of the Service. However, to pro-
vide the taxpayers with the degree of assurance required for them
to plan their transactions—which is not ordinarily present in a
223. See, e.g., 1952-1 C.B., title page, iv.; 1964-1 C.B. 1, 3. The current version of the
Internal Revenue Bulletin contains similar statements concerning the effect of an AOD.
See, e.g., 2007-6 I.R.B. 419.
224. See Dixon, 381 U.S. at 79-80.
225. 4 T.C. (CCH) 280 (1944), acq., 1945 C.B. 5, acq. withdrawn and nonacq. substituted,
1965-2 C.B. 3.
226. 1945 C.B. 5.
227. 1965-2 C.B. 3.
228. Rev. Rul. 65-259, 1965-46 I.R.B. 31.
229. Unlike regulations, revenue rulings, revenue procedures, notices, and announce-
ments, the AOD is not an affirmative statement of the Service’s position. I.R.M., supra
note 27, 4.10.7.2.9.8.1(1) (Jan. 1, 2006). Furthermore, the recommendation in the AOD can
be readily superseded by new legislation, regulations, rulings, cases, or subsequent AODs.
Id. 4.10.7.2.9.8.1(2).
Spring 2008 The Four R’s Revisited 369
mere acquiescence—the Service has, on occasion, issued a revenue
ruling, in addition to an acquiescence, based upon the facts of the
case when a court decision concerns an area of broad, general, or
administrative importance. Moreover, AODs and notices of acqui-
escence and nonacquiescence can provide some shelter from penal-
ties. The regulations specifically indicate that, in determining
whether a position has a “reasonable basis” or “substantial author-
ity,” AODs issued after March 12, 1981, constitute relevant au-
thorities.230
VII. OTHER COMMUNICATIONS
News Releases and Fact Sheets
The Service frequently issues news releases and fact sheets. In
2007, the Service issued 213 general news releases and 27 fact
sheets.231 News releases are nontechnical publications aimed at
the general public and distributed through the news media, while
fact sheets are informational documents that are also targeted for
broad public distribution.232 For example, IR-2006-116 warned
taxpayers to be on the lookout for an e-mail scam that used the
electronic federal payment system as a hook to lure taxpayers into
disclosing personal information, while FS-2006-19, which was re-
leased during Hurricane Preparedness Week, provided tips to tax-
payers on how to safeguard financial and tax records.
Generally, the nontechnical nature of the material contained in
news releases and fact sheets obviates the reliance problem. Reli-
ance is clearly warranted on news releases that announce me-
chanical rules such as due dates233 and news releases that indicate
that reliance is intended.234
230. Treas. Reg. §§ 1.6662-4(d)(3) (2003); 1.6662-3(a) (2003); 1.6694-2(b) (1992). See also
supra note 82 (discussing the evolution of the substantial authority standard).
231. Local News Releases may be issued in rare cases when an issue is limited to a cer-
tain geographic area.
232. The Service discontinued the use of Technical Information Releases (TIR), which
had been an outgrowth of the news release series, in 1976. TIRs allowed the Service’s
national office to quickly inform the public with respect to important technical develop-
ments. The content of a TIR was generally determinative of whether reliance upon it was
justified.
233. See, e.g., I.R.S. News Rel. IR-2006-144 (reminding individuals who received six-
month filing extensions of the filing deadline). News Releases are available in the Elec-
tronic Reading Room on the Service website. See supra note 153.
234. See, e.g., I.R.S. News Rel. IR-2006-194 (announcing qualifying vehicles for purposes
of the Alternative Motor Vehicle Credit).
370 Duquesne Law Review Vol. 46
Coordinated Issue Papers
The Service’s Large and Mid-Sized Business Division (LMSB)
strives to ensure the uniform and consistent application of the in-
ternal revenue laws by identifying, coordinating, and resolving
complex and important industry-wide issues. To that end, the
LMSB Commissioner provides guidance to field examiners
through the issuance of Coordinated Issue Papers. These docu-
ments are unofficial pronouncements that identify key industry or
cross-industry compliance issues and express the position of the
LMSB Commissioner, but do not represent the Service’s legal po-
sition. The Service has published more than 90 Coordinated Issue
Papers, all of which are available on the Service’s website.235 Gen-
erally, Coordinated Issue Papers cannot be relied on by taxpay-
ers.236
Appeals Settlement Guidelines
The Service’s Appeals function strives to ensure nationwide uni-
formity and consistency with respect to the resolution of factual
and legal issues of broad impact or importance, as well as with
respect to the resolution of whole categories of cases. As part of
this effort, Appeals Coordinated Issues are identified and dis-
cussed in Appeals Settlement Guidelines (ASG). More than forty
Appeals Coordinated Issues—on such diverse topics as abusive tax
avoidance transactions, sports franchises, and interest computa-
tions—have been identified by Appeals, and redacted versions of
Appeals Settlement Guidelines have been issued and are now
available to the public.237 Appeals Settlement Guidelines, like
IRM provisions, are created and intended to aid the Service’s in-
ternal administration. Generally, they are not designed to be re-
lied on by taxpayers.
Audit Techniques Guides
Audit Techniques Guides (ATG), as the title suggests, describe
techniques that have proven useful in examining particular indus-
235. These documents are available in the Electronic Reading Room on the Service web-
site. See supra note 153.
236. In some cases, reliance on Coordinated Issue Papers may be justified by Congres-
sional action. Iowa 80 Group, Inc. v. Internal Revenue Serv., 406 F.3d 950, 953-54 (8th Cir.
2005).
237. These documents are available in the Electronic Reading Room on the Service web-
site. See supra note 153.
Spring 2008 The Four R’s Revisited 371
try or entity segments. ATGs are intended to assist examiners
and develop highly trained examiners in particular market seg-
ments. They are not intended to provide legal analysis or resolve
positions on controversial or unusual legal issues. Like ASGs,
ATGs are created and intended to aid the Service’s internal ad-
ministration and should not be relied on by taxpayers.238
Large and Midsized Business Commissioner’s and Industry Direc-
tor’s Directives
Large and Midsized Business Commissioner’s and Industry Di-
rector’s Directives ensure consistent tax administration by provid-
ing administrative guidance on the Service’s internal operations.
These Directives are not legal guidance and do not establish the
Service’s position on legal issues. They should not be relied on by
taxpayers.
Miscellaneous Material
Tax Forms used by all taxpayers, and accompanying Instruc-
tions, are the Service’s primary forms of communication with the
public about how to comply with the tax law. The Service provides
hundreds of forms and instructions each year, from the ubiquitous
Form 1040, U.S. Individual Income Tax Return, to the Form 4361,
Application for Exemption from Self-Employment Tax for Use by
Ministers, Members of Religious Orders and Christian Science
Practitioners.239
The Service also publishes over one hundred publications pro-
viding detailed information on key topics to help taxpayers pre-
pare their returns. Examples include Publication 17, Your Fed-
eral Income Tax, which explains the rules for individuals, and
Publication 51, (Circular A) Agricultural Employer’s Tax Guide.
Thousands of copies of these and all the other IRS publications are
produced and distributed free of charge each year, and each can
also be ordered by computer, telephone, or mail. Tax Forms, In-
238. United States v. Marra, 481 F.2d 1196, 1203-04 (6th Cir. 1973).
239. I.R.S. Form 4361, Application for Exemption from Self-Employment Tax for Use by
Ministers, Members of Religious Orders and Christian Science Practitioners, allows quali-
fying individuals to apply for exemptions from self-employment tax. This form, as well as
all of the Service’s forms and publications, is available on the Service’s website at
http://www.irs.gov/formspubs/index.html?portlet=3.
372 Duquesne Law Review Vol. 46
structions, and Publications are also available through the Ser-
vice’s website.240
The Electronic Reading Room on the Service website provides
access to a large collection of training and reference materials.241
For example, most of the Service’s Exempt Organizations Divi-
sion’s annual series of articles of interest to tax-exempt organiza-
tions, dating back to 1979, are available at the reading room. Ad-
vance Pricing Agreement Training materials, the Disclosure Liti-
gation and Reference Book, and many other helpful resources are
also available at the reading room. Training materials on a vari-
ety of topics are available elsewhere on the website.242
Reliance
The sources of authoritative tax law are the relevant statutes,
regulations, and judicial decisions, not the Service’s informal pub-
lications.243 The Tax Court has cautioned that “[w]ell-established
precedent confirms that taxpayers rely on such publications at
their peril.”244 While the Service makes every effort to ensure the
correctness of the information contained in these publications, tax
practitioners should understand that “[a]dministrative guidance
contained in [Service] publications does not bind the [Service to
the positions they state], nor can it change the plain meaning of
tax statutes.”245 This principle equally applies to forms and in-
structions246 and any training materials that are publicly avail-
able.
Oral Communications
A final means of transmitting information to the public is
through the medium of oral communication. Each year, thou-
240. See supra note 239.
241. See supra note 153.
242. One example is the Small Business/Self-Employed Virtual Small Business Tax
Workshop. See supra note 153 for the address of the Electronic Reading Room.
243. Zimmerman v. Comm’r, 71 T.C. 367, 371 (1978).
244. Miller v. Comm’r, 114 T.C. 184, 195 (2000).
245. Miller, 114 T.C. at 195.
246. See, e.g., Casa de la Jolla Park, Inc. v. Comm’r, 94 T.C. 384, 396 (1990) (holding
that the taxpayer’s failure to file a Form 4224, Exemption from Withholding of Tax Income
Effectively Connected with the Conduct of Business in U.S., was not excused by its reliance
on instructions appearing on the face of the form); Sadberry v. Comm’r, 87 T.C.M. (CCH)
982, at *6-7 (2004) (rejecting equitable estoppel claim alleging reliance on I.R.S. Form 1040
Instructions); but see Estate of Merwin v. Comm’r, 95 T.C. 168, 179-80 (1990) (noting that
Congress provided specifically targeted relief for estates that complied with the require-
ments listed on the face of the 1982 version of Form 706).
Spring 2008 The Four R’s Revisited 373
sands of taxpayer questions and requests are answered by tele-
phone.247 The Service also conducts phone forums, seminars, and
training and education events. These communications reflect the
Service’s strong commitment to helping taxpayers understand and
meet their tax responsibilities.
Oral communications are also critical to the audit process.
Throughout the country, revenue agents hold innumerable discus-
sions with taxpayers on audit, both in the field and in the office.
Similarly, discussions between Service employees and taxpayers
also play a role in the ruling and determination letter processes.
Reliance
It is recommended that no reliance be placed on oral statements
in planning transactions or preparing returns. At most, they may
represent an informal opinion of the present position of one em-
ployee of the Service as to a particular issue and, to that extent,
they are similar in nature to informal publications.248
Over the years, oral statements made by agents on audit or Ser-
vice employees in the course of the rulings process have engen-
dered litigation involving the position of taxpayers who acted in
reliance upon the statements. However, the general rule in these
cases is that an agent or employee does not have authority to bind
the Government.249
VIII. CONCLUSION
Mitchell Rogovin ended the prior version of this article by com-
menting that the Service’s practices regarding release of informa-
tion reflect “a practical compromise between the needs of the pub-
lic for reliable and timely information and the needs of the Service
247. Nowadays, some questions and requests are answered by email.
248. See Treas. Reg. § 601.201(k)(2) (2002) (“A taxpayer may, of course, seek oral techni-
cal assistance from a district office in the preparation of his return or report, pursuant to
other established procedures. Such oral advice is advisory only and the Service is not
bound to recognize it in the examination of the taxpayer's return.”).
249. See, e.g., Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 383-84 (1947); United States
v. Stewart, 311 U.S. 60, 70 (1940); Bornstein v. United States, 345 F.2d 558, 561-62 (Ct. Cl.
1965). In very rare cases, courts have held that the Government is estopped by the actions of its
agents. See, e.g., Smale & Robinson, Inc. v. United States, 123 F. Supp. 457 (S.D. Cal.
1954); but see Heckler v. Cmty. Health Serv. of Crawford County, Inc., 467 U.S. 51, 65
(1984) (questioning whether an estoppel against the Government can be based on oral
advice). Oral statements made by the Commissioner in testimony before Congress served as a
basis for one taxpayer’s claim of estoppel, but the court determined that the taxpayer could not
prove reliance on the statements. Knetsch v. United States, 348 F.2d 932, 940 (Ct. Cl. 1965).
374 Duquesne Law Review Vol. 46
for flexibility in the administration of the tax laws.” Today, the
Service no longer has complete control over what information is
released to the public. Some of the information released may pro-
vide interesting insights into the issues the Service is considering
or how the Service conducts its business, but it merely reflects its
employees’ internal deliberations and actions on discrete matters
that may not accurately reflect the outcome in other circum-
stances. The communications released range from those that are
specifically crafted to allow taxpayers to rely upon them, to those
that could mislead taxpayers who do not understand the limita-
tions inherent in the communications. Now, taxpayers and their
tax advisers need to be much better informed about the kinds of
Service information that is available to the public and be able to
accurately discern which of these communications can be used to
predict future Service actions.
The Service and the Office of Chief Counsel believe that a key to
furthering compliance with the tax law is helping taxpayers to
understand the law and to perceive that the Service is fairly and
uniformly administering the Code.
But as Mitchell Rogovin wrote over forty years ago:
Good administration is not static. Experiments with new
ideas and new forms of communication are a continuing proc-
ess, and the history of the Service supports the conclusion
that changes in Service procedures are consistently instituted
where such changes serve the public interest. Thus, the Ser-
vice is performing its basic function—administering the In-
ternal Revenue Code—in a reasonable and practical manner.